Volatile week for Sterling, Brexit talks continue

This week’s trading began with heightened volatility for Sterling markets as speculation over Brexit talk developments will be a key driver of market movements this week. During the morning session the Pound gained 0.5% in a matter of seconds as news broke of optimism and progress in the sterling Brexit talks that would allow for a move forward to start negotiating actual trade deals and a number of other important areas of interest. These gains were however erased in a matter of seconds later in the afternoon when news broke that a deal would not be struck by the end of the day, but talks would continue later this week. Both Theresa May and Jean Claude Juncker gave a press conference to proclaim their optimism of a divorce deal being struck this week, but without providing any insight or details as to what this will actually mean, or cost.

Sterling has already risen 3 cents against both the Euro and US Dollar since last Thursday when rumours initially broke of a potential deal. Buying levels are currently near best in 6 months for Euros, and best since the referendum result for buying US Dollars. Is the positivity of a potential deal this week therefore already priced into the market? One thing is for sure and that is that there is plenty of speculation to be unwound if a progress hits and any problems this week, or worse still is not agreed at all.

Although Brexit took centre stage in the markets yesterday, there were some eco stats to digest as well. After posting stronger manufacturing growth figures on Friday, the Construction sector also posted a surprise increase in growth from last month with PMI coming in at 53.1, up from 50.8 in October. All eyes this morning will now be on the even more important Services sector growth figure at 9:30am. The day ahead also sees Euro-zone Retail Sales shortly after at 10am, and Services and Manufacturing PMI stats from the US at 3pm this afternoon.

With US Non-farms on Friday and potential further sterling Brexit news, we can expect the volatility to remain in the coming days. Volatile market can give and take opportunities in very short timeframes so keep ion close contact with your Currency Index account manager should you have an up and coming currency requirement.