Strong UK data fails to lift the Pound

This morning we had further encouraging signs that the UK economy is robust and resilient to the uncertainties of Brexit, however the news has had little effect on the value of Sterling.

The latest Industrial and Manufacturing production figures doubled the estimates, showing growth of 0.7%. Markets had only been expecting a more modest number of 0.3%. Also, the latest Trade Balance figures were significantly better than expected.

Why hasn’t the Pound gone up?

When economic releases are so much better than expected, we would usually expect the Pound to strengthen, however it’s remained fairly flat, trading at €1.13 vs the Euro at the time of writing. I think the main reason Sterling hasn’t moved is that markets are awaiting news on the latest round of Brexit talks. Today, we will hear Michel Barnier and David Davies give a press conference, and it’s unlikely that any significant breakthrough will be announced.

What they say will be very important. Last time Barnier used the word ‘deadlock’ which sent the Pound lower, showing how a few simply words from a person of influence can have a significant effect on exchange rates. If their comments are taken as a sign little progress has been made, expect the Pound to drop. If however they announce progress, then this could very easily send the Pound higher.

Also today we have a UK GDP estimate. This number has been around 0.3%/0.4% recently, and despite forecasts of a recession the UK economy has continued to grow. A good number here could keep the Pound supported, but any Brexit announcements could overshadow any economic good news.

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