Sterling remains in the spotlight

18 January, 2017

Sterling remains in the spotlight

The Sterling/Dollar exploded into extreme gains on Tuesday with prices clipping above 1.2400 after Prime Minister Theresa May’s optimistic Brexit speech signaled that the United Kingdom was seeking a deal which would satisfy both parties. A critical comment that played a role in the Pound’s sharp rally was how Theresa promised a parliamentary vote on Britain’s deal to leave the EU which suggested that she had acknowledged that the pro-EU parliament would be involved in the negotiations.

 Although markets were initially unreactive to the fact that May stated that Britain was not seeking partial membership of the EU nor will be proposing for membership of the EU single market, this may pressure Sterling in the future as investors re-evaluate the ramifications. While a transitional deal may be enacted to avoid a Brexit cliff edge on business, there is still a threat of the hard Brexit negatively impacting the UK economy in many dimensions.

PM Theresa can be commended on her ability to temporarily transform the hard Brexit fears to Brexit optimism but uncertainty could still limit upside gains on the Sterling in the medium to longer term. The fact that the government will put the final Brexit deal to vote in Parliament may buoy Sterling in the short term with Dollar weakness prompting buyers to send the GBPUSD towards 1.2500.

Investors may direct their attention towards the UK labor market report which could illustrate how the UK economy has fared in the Brexit gripped environment. While a positive report has the ability to elevate the Sterling higher, the main driver behind the Pound’s movement this week should continue to revolve around the lingering impacts of Theresa’s Brexit speech.

There still remains a strong likelihood that Sterling comes under renewed selling pressure if uncertainty resurfaces in March when the article 50 will be invoked. Technical traders may continue to observe how prices react to the pivotal 1.2350 level which if bulls conquer could open a path higher towards 1.2500.

Dollar sinks lower

The rising anxiety and uncertainty ahead of Donald Trump’s inauguration this coming Friday has exposed the Greenback to heavy losses with the Dollar Index trading towards 100.60 as of writing. Sellers have attacked the Greenback incessantly with bears exploiting comments from the President-Elect on how “the Dollar is too strong” to pressure the currency further. With optimism slowly fading over the series of interest rate hikes under Trump and the lack of clarity provided on the proposed fiscal stimulus measures weighing on sentiment, the Dollar may find itself vulnerable to further losses.

The Greenback could turn extremely sensitive ahead of Friday’s inauguration with bears utilising the anxiety to pressure the Dollar Index further. Weakness below 100.00 could signal the end of the Trump fueled bull rally on the Dollar Index.


Source link  
US tax bill send equities soaring

The Tax bill has been talked about for some time, and today was the day for it. Obviously, it cleared the US house easily enough and is now...

Equity markets looking unhinged

It should be all good news for global equity markets at present as the global recovery continues to tick along nicely. So far profits are up and the market...

Steep equity correction is underway

2017 has seen many hedge fund and portfolio managers send warning signals that an equity market correction is overdue. Overstretched valuations...


RBNZ set for change on new mandate

The New Zealand government continues to be in the eye of traders as the current changes to the Reserve Bank of New Zealand look to be...

Brent touches a new 2-year high

Oil prices continued to march higher on both sides of the Atlantic early Monday. In the early trading hours, Brent reached a high of $62.44...

US feels Trump effect wearing off

Trumps tax plan seems to be going well in Congress with Republicans continuing to offer support, even though it will produce a deficit in the short...


Markets searching for new catalysts

U.S. equity investors have decided to pull out some profits on Monday, after Wall Street’s major indices posted new intraday records at the opening...

Oil primed to jump

Oil markets have been volatile in 2017 and not the one way traffic we saw in 2016. The market has been responding to a variety of factors, the main one being the glut...

Record highs are no longer justified

Since Election Day on November 8, the Stock Market is up more than 25%, unemployment is at a 17 year low & companies are coming back to U.S...

  


Share: