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  • Pound up after sterling May speech

    23 January 2017

    It was an exciting and action-packed last week for investors and traders alike, not only here in the UK but also across the pond.

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Pound up after sterling May speech
23 January 2017

It was an exciting and action-packed last week for investors and traders alike, not only here in the UK but also across the pond.

Monday, although relatively quiet from the US, due to Martin Luther King day, started positively and saw an initial one cent gain for GBP against the Euro, following the Rightmove house price indices with the MoM coming in at 0.4% up from -2.1% previously.

Later in the day, BOE Governor Mark Carney's speech in which he conceded that the UK economy had fared better than widely expected, following the referendum, due to its "flexibility and dynamism". Mark Carney also stated that the Bank of England would be keeping a close eye on consumer spending.  Although it is driving the economy, "there are signs that households are dipping into savings and amassing debts to keep spending in the face of rising inflation", caused by a weak Pound, making imported items more expensive.

The much anticipated Tuesday saw a significant amount of inflation data, namely CPI, PPI and RPI figures, released in the UK which, due to the mixture of positive and adverse outcomes, caused sterling to remain relatively static against the other major currencies.  It wasn't until late morning when PM Theresa May gave her historic speech. After hearing what essentially boiled down to a statement claiming that "Britain will become more international, more powerful and influential in the world", once the hard Brexit is complete. For the first time after similar speeches, the Pound gained over two cents against both the Euro and the Greenback, while although dropping back slightly maintained the majority of its increase for the rest of the week, despite there still being plenty of questions that will need answering, regarding the government's plan of action. So, with so much still up in the air, it may well be worth considering securing your Euro rate now, while we appear to have a (very) short break from the tremendous volatility we have so far experienced.

Midweek saw unemployment, earnings and job figures come in as expected or better, but any slight gains against the Euro were short lived, with Euro inflation data also coming in as predicted or higher,  similarly with U.S. inflation numbers. North of the border, the Canadians announced that their interest rate would remain unchanged, with the BoC citing "uncertainty in the global outlook is undiminished".

On Thursday, the Aussies delivered reports that the number of people employed had improved but only by about 40% of expectations, while also indicating that the unemployment rate had also increased by 0.1%. Later in the afternoon, the ECB announced, predictably, that their interest rate and deposit rate would both remain unchanged at 0% and -0.4% respectively.

On Friday, Donald Trump was finally sworn in as President of the USA, amid much fanfare; it will be fascinating to see which policies he endorses and which he doesn’t. Trump’s actions will have a huge bearing, as they've already had on the USD and by extension, the Euro.

The biggest shock of the week, however, was to happen on Friday as retail sales for Dec both YoY and MoM were massively down on both the previous, corresponding figures and what was predicted or expected by the economists. But despite this, Sterling lost ground by only around one-third of a cent against the Euro, perhaps indicating that there just may be, at last, some positive sentiment keeping the Pound afloat, but for how much longer May, I ask? 

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