Sterling: not just for Christmas
With a collective gasp of relief, Parliament has headed off for the Christmas break to refresh itself for the forthcoming debates and voting slated for January. Currency markets similarly to Parliament have reflected this by regarding Sterling and where it is headed as next year’s problem. Narrow ranges in Sterling pairs today reflect the dearth of news-unless the Gatwick drone story floats your boat and qualifies as market relevant news rather than a major pain in the neck and a chance to hear words of wisdom from Jeremy Clarkson as to what he hopes lies in store in Santa’s sack for the perpetrators of the drone flights
But this pause in activity and the last weekend before the Christmas break, gives all of us the chance to reflect on where we are with our Sterling view and what movements are likely in early 2019. Interestingly a good number of market commentators are talking Sterling up in the New Year. Why? Because a UK exit deal will transpire and that will be better for Sterling than no deal. Taking the converse of that argument, no deal for the UK will be worse for Sterling.
Short term we expect that it is far more likely that consensus-yes consensus IS still possible among our lawmakers(!)-is reached to apply to the EU for an extension to Article 50. Why? Because realisation is dawning with less than 100 days to go that in the event that a deal is reached with the EU that is acceptable to parliament AND parliament votes to approve it, there will be insufficient time before the end of March to pass it into law. So, what happens then?
Sterling is more prone to a setback in the next month while this scenario plays out. If there is no deal, Sterling will certainly become weaker. If there is an extension applied for and approved, Sterling will steady and appreciate in the short term, but any longer-term appreciation will depend on a perceived good deal for the UK. That looks a challenge right now.
So, the message from the SGM-FX elves is that Sterling is not just for Christmas but needs to be carefully considered for the New Year.
Have a great weekend!
Discussion and Analysis by Humphrey Percy, Chairman and Founder
Click Here to Subscribe to the SGM-FX Newsletter
Related Insights
Daily Brief – Waiting for the Fed
Charles Porter
Tue 16 Sep 2025
Waiting for the Fed Mixed messages have been emerging ahead of tomorrow’s monetary policy decision from the Federal Reserve. Here’s a reminder of the rollercoaster that left the Fed’s September decision as one of its move important post-Covid meetings. In the face of cooling inflation, the Fed begins a relatively aggressive interest rate cutting cycle, […]
Daily Brief – 48 Hours
Charles Porter
Thu 11 Sep 2025
48 Hours There has been a noticeable shift in geopolitical risk this week. So how, baring a mild slip lower in EURCHF, have FX markets remained quite so flat? Sure, there have been some contained intraday spikes in some commodity prices but ultimately those legs higher have been thwarted, often in the very same trading […]
Daily Brief – Mixed signals
Charles Porter
Tue 19 Aug 2025
Mixed signals It was not long ago that many investment banks were warning clients of the risk of a slowdown in US equities. Having performed exceptionally well in the aftermath of the pause to Trump’s liberation day tariffs, many market participants warned of the inability of equity values to continue to enable price gains. Volatility […]
