As we closed on Friday we surprisingly saw Sterling give up gains against both the Euro and the Dollar; hitting 1.1125 against the Euro and 1.3305 against the Dollar. The main reason for this was lack of progress on the Brexit deal- and though talks are still continuing, we still haven’t had anything concrete from either side.
Generally, it was a pretty tough weak for Sterling following the new tiered restrictions which will kick off this week in the UK, and the latest spending review from the Chancellor which painted a pretty sobering picture of the economy moving forward. The best day for the market really was Monday as we saw vaccine news (Which we seem to see every Monday at the moment, I wonder what vaccine news the 30th November holds?)
This week will be pretty all over the place as it is both the end of November and the beginning of December, and markets usually start quietening down as Traders go home early for Christmas; but with a Brexit deal still to be done and talks of vaccines this month, we may see one last push before the New Year.
The direction for Sterling at this point solely lies in how the market reads any new Brexit developments; it seems Fisheries are the main roadblock to a deal at this point and it is clear to see both sides really want to come to an agreement. There are also talks of a temporary deal, which essentially would still be kicking the can down the road again, and this is an idea I am not fond of, but we will have to see how talks go.
I still maintain a positive bias for Sterling moving forward as I do think a deal (No matter how good or bad it is) will be agreed, and this will give Sterling a push. However, I do think gains may be limited due to the current economic landscape and with Covid still being the focus, I am not expecting GBPEUR to hit 1.40 anytime soon! In reality, I think a gains up to around 1.14/1.15 seems plausible for now, and then it depends on what the deal actually entails and if the markets deem it to be a good deal or not.
One other cause for strength in Sterling this week could be the idea that a doses of the Pfizer vaccine could be available in the UK over the next week, which is a big light at the end of the tunnel for many of us- and could reflect positively in the exchange rate as well.
As always, I am here if you would like to discuss a particular situation, and this month will be quite reactive depending on Brexit, so the focus will be positioning ourselves correctly in event of a spike or drop.
Be safe.