The pound has seen an excellent boost across most of the major currencies with rates climbing over 1% against the Euro yesterday and a similar movement higher again this morning for this pair. Rates for GBP EUR are sitting at 1.1750 with 1.18 firmly in sight whilst GBP USD has also seen a boost with rates trying to break through 1.26 for this pair.
Why is the pound strengthening?
Politics appears to be the main driving force for the pound once again. The historic vote in the House of Commons last night where 498 MP’s voted in favour of invoking Article 50 and 114 voted against has changed the Brexit dynamics. It now means that Article 50 will be going ahead and that everything should go through on time with an expected date sometime in March for exit negotiations to officially begin. Although the pound is making some headway now it would be unwise to expect this trend to continue with the biggest decision facing Britain for the last 50 odd years.
No one has ever left the EU before! This in itself would suggest a period of expected volatility for sterling exchange rates across the board.
A white paper is being published today which will give even more clarity as to the shape of Brexit and there could be some currency shocks as the markets react to the news. It will probably be a very entertaining day in the House of Commons.
Furthermore the Bank of England quarterly inflation report and interest rate decision are announced today and the general consensus is that both growth and inflation are expected to be revised higher in the central banks forecasts. This has the potential to be a big market mover and any rhetoric from Mark Carney that would suggest interest rates could be rising sooner could see the pound rally well today. I am of the opinion that Mark Carney will be upbeat about Britain’s prospects and there is a good chance the pound may rally.
So there you have it, another very big day on the markets with considerable volatility expected today for the pound!
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