Pound succumbs to profit taking after election spike
Philip McHugh December 16th 2019 - 2 minute read
The pound edged away from a multi-year high at the end of last week as investors engaged in some profit taking.
Sterling is back on the front foot at the start of this week however, with GBP/EUR buoyed at €1.2006, GBP/USD climbing to $1.3373, and GBP/CAD edging up to C$1.7577. GBP/AUD and GBP/NZD have accelerated to AU$1.9443 and NZ$2.0266 respectively.
Looking ahead, we could see the pound recapture its recent highs this week if Boris Johnson is able to pass his ‘oven ready’ Brexit deal.
What’s been happening?
After soaring in response to the Conservative’s decisive election victory the pound quickly began shedding ground through Friday’s session.
This downtrend in Sterling appeared to be brought on by a strong bout of profit taking, with GBP investors seeking to book their gains after a turbulent few months in UK politics.
Meanwhile, the euro was mostly rangebound through the end of last week.
The absence of any notable data gave rise to renewed concerns over Eurozone growth, with analysts expressing concerns that Italy and Germany may be unable to avoid a recession in 2020.
The US dollar appeared to be the strongest performer of the three on Friday, being buoyed by the announcement that the US and China had signed off on a phase-one trade deal.
What’s coming up?
Looking to the week ahead, UK politics will remain front and centre as Boris Johnson is expected to seek to push his EU withdrawal deal through parliament, potentially buoying Sterling if it grants more clarity on Brexit.
In the meantime the publication of the UK’s PMI figures may drag on the pound this morning on expectations the private sector will have continued to contract in December.
The publication of the Eurozone’s own PMI figures could help underpin some gains in the euro this morning if growth in the bloc’s private sector continued to show improvement this month.
Finally, the publication of the Empire State manufacturing index could provide some modest support to the US dollar this afternoon as economists forecast a slight improvement in factory activity in December.