The remarkable weeks just keep coming for the British Pound, though this time it was remarkable because GBP/USD actually finished pretty much unchanged having traded in a high-low range of 2¾ cents. After opening around 1.4135 in Asia last Monday morning, the GBP then broke its 11-day streak of never testing the previous day’s low; a sequence which had seen it rally from USD1.3450 all the way up to 1.4330. With that record gone, GBP/USD broke below 1.40 on Tuesday morning but just as it looked set for a big fall, it rallied sharply in line with all the non-US currencies and by Thursday it was back up at 1.4275.
There was little or nothing in terms of incoming economic data last week which would justify a higher
GBP. If anything, the news was very much on the negative side of the ledger. But, immediately prior
to Friday’s US labour market report, GBP/USD stood at 1.4220. By close of business it had fallen
almost exactly a cent to 1.4125. We said on Friday that, “the weekend Press is unlikely to be kind to
the government, and Prime Minister May returns from her China trip with even more uncertainty
about her own future and her ability to successfully negotiate a post-Brexit deal.” This is exactly how
it has turned out, with rumours of a leadership challenge and pressure on the PM to clarify her own
For the week ahead, there’s a Bank of England MPC meeting on Thursday. In his appearance before a
House of Lords Select Committee last Thursday, BoE Governor Carney hinted that the Bank is
preparing to upgrade the forecasts in its Inflation Report. “I would expect that in 2019 we will see a
pick-up in this economy all things being equal – strong global growth, greater certainty... A disorderly
Brexit, not a likely scenario at all, is less likely than at the time we did the assessment in the fall.”
Whether the Bank’s relative optimism will outweigh the political negatives, however, remains to be
seen. The Pound opens in Asia this morning having closed in New York on Friday at USD1.4125,
GBP/AUD1.7825 and GBP/NZD1.9335.