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Monthly Wrap: GBP – Pound remains erratic as Brexit uncertainty dominates sentiment

currency-newsMonthly Wrap: GBP – Pound remains erratic as Brexit uncertainty dominates sentiment
Key takeaways:
-              Brexit vote delay drives pound lower.
-              Parliamentary vote now set for 15 January.
-              GBP Monthly lows: €1.09, $1.24, AU$1.72, NZ$1.81, C$1.67
-              GBP Monthly highs: €1.12, $1.28, AU$1.84, NZ$1.91, C$1.75

Brexit and political uncertainty proved to be the main catalyst for movement in the pound again in December as markets reacted violently to Theresa May’s decision to delay a House of Commons vote on her Brexit deal.

The delay was not only seen as a ‘blow to Brexit clarity’ but resulted in the PM facing a vote of no-confidence which further rocked Sterling.

However with May surviving the vote and MPs later being granted a greater say on Brexit, GBP exchange rates were able to trend higher throughout the second half of December.

This volatility appears to have persisted into 2019 as well as a flash crash which briefly propelled GBP/USD to a 20-month low on the first day of trading before rallying back above $1.27.

In terms of data the pound found support from a surprise upswing in wage growth, with average earnings striking a decade-high in October, although concerns that growth will have moderated in the fourth quarter continued to drag on Sterling sentiment over the month.

Looking ahead, should the parliamentary vote on the EU withdrawal bill go ahead as scheduled this month then it is likely to have a dramatic impact on GBP exchange rates.

This could see the pound plummet following the vote if MPs reject the deal amid fears this will greatly increase the chances of the UK facing a no-deal Brexit.

Should Sterling find any respite from Brexit then it is likely to come from the release of the UK’s latest inflation and wage growth figures, both of which are likely to be watched closely for any hints of how they may impact the Bank of England’s (BoE) monetary policy this year.
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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