Sterling exchange rates have experienced a lot of volatility over the last week- the first part of volatility was due to BoE Governor Mark Carney making comments about the UK economic outlook, most of which were negative and stated that it is the worst in over 10 years. However, this negative outlook is only due to uncertainty about Brexit- so from an economic standpoint- this can be turned into something positive once there is some certainty in regards to the Brexit deal and how things will work moving forward.
The Pound then bounced back due to the EU stating that they will work with UK PM Theresa May on potentially finding a resolution for the deal- how much truth there is to these comments is unknown, but the market will move on any Brexit news.
The PM has promised a “meaningful vote” at the end of February- and as we have had one of these over the last months we know how volatile these events can be- if it looks like she can get a deal that MP’s are happy with agreed before then, then I expect this to be a positive event. However, if there is no change in the deal, then I do expect the Pound to weaken until a resolution is found- i.e extension of Article 50 etc.
There are important economic data releases which could also have an effect on the market- on Monday the UK will be released GDP numbers (Expected to show contraction) alongside industrial production (Expected weak), Manufacturing production (Expected stronger) and trade balance data (Expected weaker).
On Wednesday, the UK will release CPI (Inflation) figures which are expected to show that we are back at the initial BoE target of 2.0% which is positive, however, due to Brexit developments expected this month, this could be ignored until we have a resolution for Brexit.
On Friday, the UK will release retail sales data which is expected strong- which could be enough to lift the Pound. Overall this week is very busy for the Pound, and there could be opportunities for both buyers and sellers- if you have an upcoming transaction and would like more information on how to navigate this volatility- please don’t hesitate to contact me.