Risk flows support sterling

Good morning,

Sterling wasted no time yesterday by once again improving on its previous days gains by moving to an impressive eight month high against the euro and two and a half year highs on the dollar.

Although the price retreated back as wide scale profit taking across the markets before the weekend took place; it is clear markets, now free of the Brexit burden, are happy to keep the pound propped up as global risk appetite returns to the markets. As mentioned a few months back, the fortunes of sterling could be pegged to a great many things aside from Brexit – chief amongst these was sterling’s place as a ‘risk-on’ currency which can be linked to global stock markets. Although not an exact science, as sterling is still seen as a riskier currency to hold as its economy establishes itself in a post-EU world, as risk appetite returns to investment in stocks and shares, so to do investment flows into the pound.

As far as hard data goes, the UK’s service and manufacturing data is out this morning showing the preliminary figures for January, with the obvious expectation that numbers will be supressed due to the ongoing lockdown. If numbers vary wildly from what’s expected, GBP pairs could take a hit – but by en large, sentiment surrounding the continuing success of Britain’s vaccine rollout efforts means that the pound is in good shape, as long as the numbers continue to impress.

Have a great weekend.

Joshua Haden-Jones, Senior Relationship Manager.

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