Pound remains stable as Theresa May promises stronger, fairer post-Brexit Britain
Forex trading is tumultuous at the best of times, but recent months have marked a particularly notable degree of uncertainty characterising the markets. Due in large part to Brexit, this has been the key driver of the pound’s performance, yet now it seems that the sterling could finally be stabilising.
A More Stable Pound?
Following a recent speech by the Prime Minister, Theresa May, only a year after she took office, the currency seems to have flat-lined – for the time being, at least.
Lifting slightly against the euro and the US dollar, to 1.1302 and 1.2889 respectively, sterling’s position seemed to be bolstered by the speech from Ms May, which promised a ‘fairer and stronger Britain’ in the wake of Brexit.
Investors Holding Back
However, all may not be as it seems. Rather than being attributable to a surge in investor confidence, this trend may exist in part because the markets are waiting with bated breath on updates from both the Bank of England and economic experts, which could lay the foundations for UK interest rates moving forwards.
With higher interest rates generally working to strengthen a currency, it might thus be the case that traders are more interested in holding out for the results of talks by Monetary Policy Committee members Andy Haldane and Ben Broadbent than examining the policy machinations of Mrs May.
The former has garnered particular interest following comments by Mr Haldane which hinted that an interest rate rise may be imminent. As research director Kathleen Brooks explains: “It will be interesting to see if Haldane continues to keep up the hawkish tilt in his speeches.”
She continues: “If Broadbent joins him, then the market may start to wonder if the split could tilt to 5-4 for no hike at the next meeting, lowering the bar further for a rate hike from the BOE just at the time that wages look like they are stalling and the economy is taking a turn for the worst.”
Stock Market Risks
Experts warn that traders should beware if such a prediction comes to fruition, with UK stocks, especially the FTSE 250, vulnerable to being hurt by such an act.
This means that although stability may be present for now, investors must steel themselves for further volatility in the pound in the days and weeks to come.