Sterling stutters into a new week (but it’s not safe yet) – Business Moneyfx
By Sam Budd
Sterling was centre of attention on currency markets last week, as it fell sharply – most severely against the euro and the US dollar (which took a 6% hit).
Speculation on the downward movements in sterling were focussed around comments from the UK government, which suggested that the country could be heading for a ‘hard’ Brexit and a ‘fat-finger error’, creating the flash crash that we saw Thursday night.
Market Strategist Boris Schlossberg told CNBC’s “Squawk Box” that hard-hitting comments from French President François Hollande caused a dip in the pound, but with low liquidity in the market and option barriers set too high, “it just became a vortex.”
In terms of other currency market moves, some improvement in market sentiment also saw the Japanese Yen weaken. Meanwhile, EUR/USD was fairly unchanged throughout the week.
Access to EU Single Market debated
Looking at the week ahead, Sterling is likely to remain in the headlines, and should remain sensitive to any further news or updates regarding the upcoming Brexit negotiations. Following this, MPs are looking to go head-to-head with Theresa May over access to the EU’s Single Market, as the government prepares for a series of legal battles over its right to take Brexit decisions alone.
Theresa May has been set to prioritise immigration reforms, while MP’s argued that May has no mandate to take the UK out of the Single Market, highlighting the party’s 2015 manifesto commitment to retaining access. This week, the government will also prepare to argue in court for its ability to activate Article 50, without consent of the MPs.
Data to come
Over in the US, Retail Sales for September are expected as the main release of a fairly light macroeconomic calendar (due out Friday). The figures are forecasted to record a solid improvement, after weak data for July/August. In news of US monetary policy, the September FOMC minutes (Wednesday) and a speech from Fed Chair Janet Yellen (Friday) could yield some interesting market movement.
The fact that we have a fairly quiet macroeconomic calendar this week suggests that we’re not likely to see much movement and that the Sterling volatility will remain, sensitive to any further Brexit talks.
Material supplied by our affiliate Currencies Direct.