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 – Defiance
Charles Porter
Tue 12 May 2026
Defiance Yesterday’s market was defying one of two things: logic or gravity. Come to think of it, perhaps both. Take cable, GBPUSD, yesterday. The key events beyond minor data releases centred around any chatter from either side of the Iranian conflict and Starmer singing for his supper. Sing he did and tweet the President did, […]
Daily Brief – Short-lived relief rally
Humphrey Percy
Tue 19 May 2026
Short-lived relief rally A tantrum in the bond market has continued to erode away at risk conditions in recent sessions. In the UK, the sell-off in gilts and corporate bonds has been particularly acute thanks to heightened political instability, the origins of which we have covered thoroughly in recent briefings. Yesterday, headlines delivered enough optimism […]
Daily Brief – Room to manoeuvre
Charles Porter
Tue 26 May 2026
Room to manoeuvre Kevin Warsh was sworn into office at the White House on Friday. Despite limited market movement on Friday, many prices gapped significantly come the open yesterday. Whilst the UK and US observed a bank holiday yesterday, many indices and currencies were on the move. The theme across the market was risk on […]
