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GBP surges as Trump predicts strong post Brexit UK-US trade

currency-newsGBP surges as Trump predicts strong post Brexit UK-US trade
An optimistic outlook from President Donald Trump on the future of UK-US trade yesterday drove the pound higher against the majority of its peers.

Pound Sterling starts today at least holding, if not advancing from, opening levels – with particularly impressive gains against the US dollar. GBP/EUR is stuck flat at €1.1420, but GBP/USD is up 0.7% to US$1.4244. GBP/AUD has inched up from opening levels to AU$1.7637, GBP/NZD is flat at NZ$1.9355, and GBP/CAD has risen 0.2% to C$1.7549.

Although the pound may have been on the advance yesterday against many of its major peers, the GBP/EUR exchange rate slumped. Read on to find out why…

What’s been happening?                

Comments from US President Donald Trump at the World Economic Forum (WEF) event in Davos yesterday regarding the future of UK-US trade gave pound Sterling another strong boost yesterday.

Recent events, such as Donald Trump’s retweeting of messages by controversial far-right group Britain First and the strong backlash against the idea of an official state visit for Trump, have weighed on the ‘special relationship’ over the past few months.

However, Trump spoke warmly of the UK during his meeting with Prime Minister Theresa May and predicted a strong increase in trade between the two countries, boosting hopes of a lucrative post-Brexit free trade agreement.

The pound may have been on strong form, but GBP/EUR slumped yesterday after the latest European Central Bank (ECB) monetary policy decisions were announced.

There were no changes made to the ECB’s current economic stimulus program, but a lack of downbeat comments from ECB President Mario Draghi during the subsequent press conference saw investors piling back into the euro; the Eurozone’s chief policy setter is famously dovish.

While comments from Trump himself may have raised hopes of a free trade agreement between the US and the UK, the latest statements from his Treasury Secretary and Commerce Secretary did nothing to quell fears over the protectionist line taken by the US in recent months.

Commerce Secretary Wilbur Ross once again insisted that other nations are already following protectionist strategies, even if they claim to advocate free trade.

What’s coming up?

Fourth-quarter UK GDP figures are set for release this morning and it will be interesting to see how markets react. Quarter-on-quarter growth is expected to have held steady at 0.4%, but year-on-year growth is expected to have slowed from 1.7% to 1.4%.

The European Central Bank will release its Survey of Professional Forecasters this morning - if the latest poll shows that the consensus outlook is upbeat then the euro could build on yesterday’s gains.

US fourth-quarter GDP figures and the preliminary December durable goods orders data are likely to keep the GBP/USD exchange rate on volatile form until mid-afternoon, when Bank of England (BoE) Governor Mark Carney will speak at a panel event in Davos. President Donald Trump will also be giving an address in Davos later, which is sure to cause turbulence for the US dollar.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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