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Weekly roundup: Pound strengthens despite political concerns

currency-newsWeekly roundup: Pound strengthens despite political concerns
Despite being softened by political concerns, the pound was able to largely strengthen last week. Sterling was undermined by concern that deteriorating relations between the UK and the EU would complicate Brexit negotiations and adversely affect the post-divorce relationship. However, economic data was positive, suggesting that the weakness seen in the first three months of the year may be temporary.

The earlier part of last week saw the pound unsettled by reported clashes between the UK and the EU. Theresa May had accused EU leaders of trying to interfere in the general election, which prompted numerous barbed responses. EU Commission President Jean-Claude Juncker delivered his latest speech in French, telling his audience that English was slowly losing its importance. Meanwhile, there were rumours that the amount the UK would be required to pay the EU to cover the financial costs of Brexit had risen from €60 billion to €100 billion.

Meanwhile, a trio of strong business surveys suggested that the UK economy was rebounding after the slowdown in growth seen during the first three months of the year. However, service industry activity - the main driver of UK growth - remained subdued by historical standards and showed a 21-month high in input prices, which suggests consumers are going to see even sharper inflation in the future.

On Friday the pound advanced thanks to the preliminary results of the UK’s local council elections. Early counts had shown that the Conservatives managed to steal well over 100 seats from Labour, suggesting that the party will be able to firm its majority in the upcoming local election. This could make the Brexit process smoother, as opposition parties won’t have as much sway over the government, potentially resulting in a more positive outcome for the UK.

Although this week is quiet overall in terms of data, Thursday is chock-a-block with news that could impact the pound. As well as industrial, manufacturing and construction output figures and trade data, the latest Bank of England (BoE) monetary policy decisions will be announced and the new Inflation Report published.
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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