Following the election result in the UK last week Sterling has maintained its downward projection as uncertainty surrounding the nature of Britain’s exit from the EU clouds investors.
Prime Minister May had been set to employ a harder style Brexit with her promise of ‘a good deal or no deal’ however her failing to obtain a substantial majority in the polls last week has weakened her positon. A much softer than anticipated exit is now being mooted by political correspondents and market analysts however with negotiations not set to begin until next week this is merely speculator.
Sterling, being a sentiment driven current has no significant reason to strengthen while the country lies in political limbo. Economically, central bank policy is something that needs to be watched closely with the Bank of England set to meet on Thursday. Despite no rate hike forecasted, attention needs to be paid towards the rhetoric from Governor Carney about the overall health of the UK economy. Should inflation continue to rise and wages continue to flat line there may be some further downside surprise in Sterling.