Just as it seemed that sterling gains were skewed towards overwhelming Euro weakness; politics intervenes to make things that little bit more interesting. Yesterday’s UK trading session yielded a huge 1.15% jump up against the Euro and 0.95% against the Dollar, closing above 1.2050 and 1.3060 respectively.
Whereas the story originally was firmly focused on the collapse of Euro sentiment across the board in the face of probable ECB rate cuts; by lunchtime, however, the low key affair of a cabinet reshuffle exploded into full view. Whilst the reshuffle itself was never meant to ruffle feathers in the foreign exchange market, as all elected Conservative MP’s had to sign a Brexit pledge before nomination in 2019, the shock news of the day was that Savid Javid, the Chancellor of the Exchequer, had resigned amid a power grab from number 10.
The market reaction to the upside was centred on the fact that the now ex-Chancellor was keen to reign in some of the free-spending projects earmarked by number 10 to “level up” the country. By planting their desired candidate in number 11, markets boomed on the notion that number 10 will now have its way and provide the desperately needed infrastructure changes needed to support Johnson’s post-Brexit economy.
It remains to be seen if this newfound pound positivity will last in the short term, as the markets begin taking profit above the 1.2000 mark on GBPEUR and 1.3000 on GBPUSD. Rates like this haven’t been available since the election, which when hit, promptly moved lower.
At the time of writing this morning, we have already lost 0.30% against the euro and 0.25% on the Dollar. Call us to discuss locking in some of the sentiment before the weekend, as it could be the difference of thousands of pounds.
Have a great weekend,
Author: Joshua Haden-Jones, Senior Relationship Manager
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