Sterling has started the New Year positively having reached a near 5 week high against the Euro and close to an 18 month high against the US dollar. Sterling did take a slight hit yesterday following the re-shuffle of Prime Minister Theresa May’s cabinet.
For me I still believe the pound is in a very fragile position, this has been highlighted by the fact that this morning we have seen UK manufacturing data released at its highest level in nearly 10 years, recording its seventh consecutive month of growth in November and yet sterling has fallen in value this morning.
I believe yesterdays re-shuffle has shown some major cracks in Theresa May’s Government with many questioning her authority and it is this uncertainty that could keep people away from the pound.
This uncertainty combined with on-going questions surrounding Brexit, is likely to keep the pound on the back foot. The next phase of Brexit is key and is set to be concluded by October 2018. In this next phase negotiations surrounding future trade and non-trade relations will be discussed with a view to the exit deal being agreed and concluded between the UK and the EU.
This trade deal could be key to the future movements for sterling and I believe any sterling gains will be hindered until this ratification process begins.
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