The pound continued its slide against the euro yesterday while the London markets were closed, slipping by around 30 pips. The causes of renewed uncertainty are entirely based around politics, since the economic data continues to stack up in sterling’s favour. This included Thursday’s “astonishing” retail sales data that was up 1.1% month on month and 6.7% over the year. Added to the good news on wages earlier last week and the country’s resilience in the face of Brexit uncertainty continues to confound.
So why has sterling dipped against both the USD and EUR? Brexit of course, and the renewed possibility of No Deal. The Brexiteers, following a bruising period in which the possibility of No Deal seemed to be all-but dead, have been bolstered by Nigel Farage’s new Brexit Party. Early polling shows it leading the field in the Euro elections (which the UK will have to take part in of it cannot pass a deal before then), with 23% of the vote, while the anti-Brexit parties are split.
The 31st October extension also leaves time for the election of new, harder-Brexit Conservative Party leader and the raised possibility of No Deal, or a General Election. None of this is the kind of stable politics that would favour sterling.
For the remainder of this week, data releases are few and far between. We have CBI Industrial Trends and Business Optimism on Thursday and Mortgage Finance Approvals on Friday, all of which are expected to improve.
All eyes will be on the talks between the Government and Opposition over Brexit as MPs return to Westminster. What will their party members have been telling them over Easter?
