How will Spring Statement affect Sterling?

Sterling edged higher against the Euro yesterday, recovering some of last week’s losses to approach the €1.13 level again. Markets expect the OBR to upgrade the UK’s growth forecasts today during Chancellor Hammonds Spring statement. We don’t expect any other announcements on tax and spending, and usually the Spring statement doesn’t have too much of an impact on the currency markets. The Pound could head above €1.13 again however if the OBR do raise growth forecasts as expected.

The UK economy is performing quite well, and the only reason the Pound isn’t higher is the failure to move forwards with  Brexit negotiations. The EU are seemingly unwilling to budge and actually negotiate, and this uncertainty is keeping Sterling from trading higher. There is a summit in 10 days and I do expect the a Brexit transition agreement will be reached, and this could help the Pound gain. It won’t take much to help push the Pound higher – interest rates rises are already largely priced in to the value of Sterling, so all we need is some progress with Brexit talks.

Those that need to buy Euros could see where rates lie after the Spring statement at 12:30pm today, and if the Pound does gain then it could present an opportunity to purchase Euros at a higher rate. There’s not much else on the agenda today, or for the rest of the week, in terms of economic data releases, so Sterling is likely to continue being driven by political developments.

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