After 4 weeks of weakness for the Pound, we finally saw a great move of strength late Friday afternoon after the terrible results for Labour and Conservative after the local elections. The results have encouraged many senior Tory party members to put pressure on their party in cross-party talks to deliver Brexit and win voters confidence. We saw GBPUSD rise above 1.31 and GBPEUR rise above 1.17.
The rumours have only increased over the weekend and it looks likely that talks with resume this week with a more serious tone… whether this materialises into something is another question. It seems the PM is warming to the idea of a customs union and this is what has really put strength into the Pound as it does remove a lot of uncertainty, however I would not bank on this strength sticking around forever, as we have learnt over the past couple of years that nothing is set in stone when it comes to politics!
The Bank of England also helped the Pound this week by increasing growth forecasts and stating that interest rates will have to go up over the next 12 months, this has also calmed the financial markets in knowing that the BoE no longer sees a “No Deal Brexit” as a likely scenario and is happy to continue with monetary policy.
The UK will release GDP data for Q1 2019 on Friday and the U.S will release CPI data on Friday afternoon, both sets of data will have an impact on the market as they are both numbers that the central banks are closely watching.
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