Will the Pound Continue to Rise as Rishi Soothes Market Nerves?

GBP USD Exchange Rate Falls to Two-Year Low Amid Political Uncertainty 

The pound has been performing near the top of the recent ranges as the new UK Prime Minister Rishi Sunak takes office. Sterling has rebounded back into the 1.15s on GBPEUR and GBPUSD, presenting much improved times to buy a foreign currency when selling the pound.

As Rishi himself has stated, the UK faces some major challenges with inflation running at 10% and fears over stagnation and recession likely to harm the economy ahead. Rising interest rates are going to increase borrowing costs for millions of consumers and also businesses, who will have much less disposable income.

Looking ahead for the pound and the UK economy there are some major challenges that mean sterling is not out of the woods and future GBP weakness cannot be ruled out. By that measure, this latest improvement could be well worth considering, as this current enthusiasm for GBP might not last.

Whilst we cannot ever say exactly what is around the corner in the FX markets, we do know there are some big issues to resolve, that left unchecked could see uncertainty rising once again.

Keir Starmer, the leader of the opposition is still calling for an election, and whilst this does not appear so likely now, were there to be a further deterioration in the UK’s political situation it is a possibility if a vote of no confidence is held.

Sterling has proved quite resilient since the mini-budget fiasco at the end of September that saw the pound majorly sold off. Rising interest rates and intervention by the Bank of England in the gilt markets has restored confidence for now.

There is still no majorly clear direction being established and whilst the pound is higher, you can make a reasonable case for travel in either direction based on different analysis which I would be happy to share with you and discuss in more detail.

For more information on where the pound is headed, and what you can do to mitigate the uncertainty, please feel free to contact me directly on [email protected]

Thank you for reading.

Jonathan