This week has seen sterling make some of the most impressive gains in recent history and has gone from being one of the world’s worst performing currencies in October to so far the world’s best performing currency in November. Will this twist for the pound be as quickly reversed as it occurred or are we now looking at the start of a new chapter in the value of sterling? Nothing should be taken for granted on exchange rates and the moves this week serve as a reminder to any clients who think they can second guess the market and are assuming they know what will happen longer term.
Unexpected events can often happen on exchange rates and this week the election of Donald Trump proved that we should always expect the unexpected. Trump’s election has sent ripple through financial markets and tipped the balance of countries seeking control over their economies and borders (now the US and the UK) versus those in favour of open borders and more monetary integration (the Eurozone). With attention now turning to political concerns in the Eurozone the Euro has lost ground and sterling has been seriously buoyed as investors seize on the pound’s low value and await further improvements longer term.
This month there is still plenty of data and events to move financial markets including the Autumn Statement. I think sterling will now enter a period of consolidation and will not just keep rising in this market. There are too many negatives for the UK to overcome and I do feel anyone buying a foreign currency with the pound should be cautiously optimistic.
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