Sterling temporarily hit a two month high against the Dollar during trading yesterday, and it seems like the Pound has come well and truly back into fashion. We saw gains accross the board and over the trading day Sterling made ground on all major currencies and ended the day as the top performing major currency, breaking through and remaining above 1.30 against the Dollar.
The reason behind this mainly seems to be the likelihood of a ‘no deal’ Brexit slowly decreasing, and should the chances of a ‘no deal’ Brexit continue to decrease then I feel Sterling may have further to climb.
It is in fact a ‘no deal’ scenario that has the potential to really hit the Pound hard and investors and speculators alike had been cautious of this happening which has meant the Pound has stayed fairly low as the Brexit deadline approaches.
My opinion now is the same as it was a few weeks back, I feel that Theresa May will struggle to get a deal that is deemed good enough and voted through by her right honourable friends and that the Govenmenr will be faced with having to approach the EU and request an extension of Article 50 whilst they go back to the drawing board and try to work out the best course of action.
They really are stuck in a difficult situation as not following through with the public vote could cause social issues in the U.K, a second referendum could also do the same, even if the options now are a lot clearer than what had been proposed in the first one.
U.S Government shutdown impacting USD
On top of this we have the Goverment shutdown in the states which is impacting the Dollar in a negative way. We have seen GBP/USD rates move from a low this year of 1.2442 to being above 1.30, a movement of over 6 cents in this year alone. This would be a difference of almost £7000 if you had $200,000 to sell into Pounds and you caught the rate at the right time this year!
Many celebs are now diving into the Government shutdown debate as thousands of workers are not being paid and the economy will be taking a hit on each day that this continues.
I feel the pressure will slowly mount and something will have to be resolved soon, but the longer this goes on the more chance there is that the Dollar will weaken further. .
With all this in mind I feel that there is more chance of seeing GBP/USD breach the 1.35 mark in the coming weeks than dropping back down to the 1.25 mark. If you have Dollars to buy or sell, or you have a currency to exchange that is pegged to the Dollar then it is crucial you deal with a proactive and experienced currency broker.
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