Sterling Forecast – What Next for the Pound? (Matthew Vassallo)

Will today's UK data provide another boost for the Pound?

Sterling has made gains against its EUR counterpart this week, moving back above 1.13.

This positive move came about despite some positive Eurozone economic data, which came in the form of Industrial Confidence & Retail Sales figures.

Sterling has now hit a five week high against the Euro and sits close to a one year high against the USD, despite not making any significant move against the greenback this week.

Despite its improvement the Pound struggled to make any further impact after its initial spike, with the EUR finding support around the 1.13 threshold.

The reason we saw Sterling improve is perhaps due to the re-shuffle of UK Prime Minister Theresa May’s cabinet.

This has been as a positive step by investors but with the a negative aura still surrounding the apparent split in Parliament, how much further can the Pound rise?

Despite this slight upturn, I still feel that sterling will struggle to make an aggressive impact against the EUR or USD this year, with investors remaining sceptical regarding how the next phase of Brexit talks will progress.

This is likely due to how tough the next round of Brexit talks are predicted to be and the potential obstacles that could scupper any deal being agreed. We are now entering a phase, where the key points of the UK’s separation from the EU will be discussed. These include the relationships that will remain with our closest neighbours, particularly in terms of what trade deal the UK will be granted upon its exit.

As a result we are likely to see tensions rise and I would be surprised if this didn’t have a negative impact on Sterling’s value over the coming months. The first round of negotiations were far more tedious than most experts had predicted and it does make you wonder how the UK government will navigate the second phase of talks.

A close and open trade deal is key for the UK’s economic well-being and ultimately Sterling’s value over the coming months. With years of potential prosperity hinging on the outcome of these talks, it is clear that Brexit and its final outcome is going to drive market sentiment and ultimately Sterling’s value through 2018 and even beyond.

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