The pound has entered 2019 on a weaker footing owing to Brexit uncertainties, compared to some of the higher levels achieved against the greenback in 2018. Movements in 2019 has been mainly dictated by the US dollar, as the currency markets try to gauge the outlook and likelihood of further economic uncertainty in the United States.
The tensions inherent in the US and global economy were highlighted last week when the mini ‘flash-crash’ triggered a strengthening of the US dollar. This move, likely triggered by the bad news from Apple over future sales expectations weighed on the currency markets and stock markets.
This news saw GBP/USD slide to 1.2450 before making a sharp recovery as the immediate concerns abated. The bad news was quickly replaced by good news, with the US reporting excellent jobs data on Friday. Non-Farm payroll data was the best since February 2018 and helped restore confidence.
Interestingly, this also helped the US dollar to rise, highlighting the different behaviours of the US currency. It acts as a safe haven currency and will strengthen as investors uncertainty increases whilst it will also rise on strong economic data from the US too.
Brexit vote still the main influence on sterling
The big news for sterling is really next week with the latest news on Brexit from Theresa May. Will her Brexit deal pass in Parliament? Expectations are for a mixed reception, many headlines suggest it will not pass which would likely see the pound much lower.
Any clients looking to buy or sell US dollars against the pound could find they are in for a very volatile session, as investors react to the continuously changing environment surrounding the Brexit and the Trade Wars.
GBP/USD rates look to me as if they will remain in the higher 1.20’s for this week, before potentially moving much lower if signs of a no-deal Brexit increase. If you have a position to buy or sell US dollars then please speak to us ahead of these important events to make sure you are fully up to date with the market and the latest news.
Thank you for reading and I look forward to welcoming any questions or comments. If you would like to discuss anything in my GBP/USD forecast please use the form below to send me a message: