The UK received another boost yesterday after manufacturing data from the Confederation of Business industry (CBI) showed British manufacturing grew strongly in September. UK car manufacturing reached the highest level in August for 14 years and highlighted an increase of 10.2% in vehicle exports. Despite the strong numbers the pound was largely unaffected with little market movement as the concerns over Brexit still remain which is keeping the downward pressure on sterling exchange rates.
UK GDP numbers released next week and could create some major volatility for the pound. The markets are largely concerned with how well the British economy is performing post Brexit and the GDP numbers are the proof. Any sign of weakening that can be attributed to Brexit is likely to have a negative impact on the pound. My understanding is that GDP should hold relatively steady and if this is the case then we could see another rally for sterling exchange rates.
GBP EUR has now dropped 5 cents in the last 2 weeks and it looks like there will be further to fall for this pair. Longer term and my view is that the pound should strengthen but not until Article 50 has been invoked and trade negotiations are well underway between Britain and the EU. For the moment the pound is in a weaker position with the Brexit jitters still on investors’ minds. GBP USD should see a rally in the coming week as we approach the US presidential election and high volatility is to be expected.
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