After a horrid close to last week with a loss in Sterling totalling some 0.4% on the day, this week has delivered a far brighter fortune to the Pound… so far. Soaring for the third consecutive day and putting Sterling on track for a record-breaking week. Enjoying a staggering 0.6% appreciation on the day, the Pound now stands close to key resistance levels at 1.15 against the Euro and the mid-1.31s. The change in the value in Sterling most closely resembles the shifting attitude of traders and investors with respect to the Article 50 deadline and the wider Brexit deal. Speaking at the 2019 World Economic Forum in Davos, Switzerland, the UK Secretary of State for International Trade affirmed his willingness for an extension to the Article 50 deadline. The pro-Brexit minister’s words lifted Sterling through the important 1.30 mark against a weakening US Dollar and paved the way to the lofty heights at which Sterling closed the day’s European trading session. Despite losing mild ground in the US Session so far, the Pound still remains well-bid. Progress in the House of Commons today also fostered support for Sterling with market participants growing increasingly confident that the UK will not drop out of the bloc on 29th March.
Speaking at Davos this afternoon, German Chancellor Merkel has spoken of the need for a swift return to “normal” monetary policy. Whilst the European Central Bank remains independent in its capacity to set monetary policy with a staunchly dovish stance towards policy, the political pressure from Europe’s largest economy did not go unheeded. The Euro therefore won today’s battle over the US Dollar with the cross fast approaching the key resistance level at 1.14. The ECB will publish its latest monetary policy decision tomorrow with markets waiting to hear how the central bank will acknowledge growing downside risks to European economic growth and dwindling market expectations for a 2019 interest rate hike. The Euro remains poised, therefore, for a rock day tomorrow.
Discussion and Analysis by Charles Porter