Yesterday was a topsy-turvy day for sterling to say the least. It started the day in a position of weakness, despite some extremely positive car sales figures and encouraging services PMI. Ongoing trade tensions are weakening currencies against the dollar, as investors look for safe havens in the current climate of uncertainty.
However, when Bloomberg published a report claiming that Germany was prepared to accept a less detailed agreement on the future relationship between the UK and EU, the pound surged against the euro and dollar. There was a two-cent swing between the highs and lows between the pound and dollar, but the pound did fall back a little bit towards the end of the day.
The currency markets can be fickle at the best of times. What might at first appear to be extremely positive can soon look otherwise. Of course, the Bloomberg report is certainly positive. However, Germany doesn’t speak for the EU and, as we have said several times before, until everything is agreed, nothing is agreed. It remains to be seen what Barnier and May will say about the reports; when they comment we can reasonably expect further sterling movements. In which direction will entirely depend on the sentiments expressed.
Today we have very little on the economic data front, but any reaction to the Brexit news could drive the currency markets, at least where sterling is concerned.
