Sterling hits seven-month high, posts best month since Brexit
Since late September on Friday sterling finally climbed to its highest rate against dollar in spite of a slowdown in the Britain`s economic growth. According to the Office for National Statistics, UK economy in the first 3 months of 2017 sharply slowed, as sterling weakness following last year’s Brexit vote, caused high inflation and hurt retailers greatly.
Hitting a seven month high of $1.2957, by 1534 GMT it went down to $1.2945.
“Basically, the bad number was more or less priced in,” said CMC markets analyst Michael Hewson. He expects the sterling to go up to $1.33 in coming weeks. “This data doesn’t include the March data which was actually slightly better … so the likelihood is the data is going to get revised up.”
Sterling`s raise was due to the fact that short positions on the pound were close to record highs, making “short squeezes”, according to the Rabobank currency analyst Jane Foley.
Currently the pound is less than 14% down against the dollar since last June’s referendum on European Union membership. As we may see, it has fallen 23.5%, which is a 31 year old rate.
On April, the 28th, last trading day of the month, the sterling was almost 3% against the dollar. Also, in April a trend of sterling appreciation was noted.
Last week, when Prime Minister Theresa May called a snap election for June 8, with traders betting that if the ruling Conservatives can get a much bigger majority than their current 17, which is widely predicted in the polls, that will bring political stability; sterling rate rose 4 US cents.
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A number of analysts also take into consideration that a strong majority would strengthen the government’s hand in its exit negotiations with the EU, which will reduce the possibilities of a “hard Brexit” in which the UK loses access to the European Single Market.
“The assumption that Britain’s June election will deliver a clear victory for Theresa May and place Brexit negotiations on a firmer footing has fundamentally shifted attitudes towards the pound,” said David Lamb, head of dealing at FEXCO Corporate Payments.
In spite of the fact that the euro is being boosted by inflation numbers, the pound is edged up against the single currency, up 0.1 percent to 84.19 pence.
Sterling hits – Fri Apr 28, 2017
On Friday, after severe euro zone inflation numbers, the euro jumped against the US dollar which, after the suggested data that Federal reserve would raise the interest rates two more times in 2017, rose against the yen.
Euro zone inflation is estimated to be at 1.9% in the first quarter, while the expected European Central Bank’s target is of below but close to 2 percent. And that helped to move the euro upward to $1.0947.
“The ECB will certainly have to build inflation into their rhetoric at the June meeting, given the data,” said Jason Leinwand, founder and chief executive of FirstLine FX in Randolph, New Jersey.
According to the analytical forecast, the latest inflation figures could speed up the ECB to either upgrade its assessment of the European economy or suggest less need for stimulus.
After the U.S. Labor Department data showed 0.9% private wages and salaries acceleration in the first quarter, the US dollar rose 0.4% against the yen.
Though the gross domestic product increased at 0.7% annual rate, which has been the weakest performance since the first quarter of 2014, that somehow firmed the inflation and made the dollar rise.
According to the chief market analyst at Commonwealth Foreign Exchange Inc in Washington, Omer Esiner, “The GDP data won’t alter the view that the Fed may raise rates in June and then ultimately again in September.”
The durable concern over U.S. President Donald Trump’s dissatisfaction with the North American Free Trade Agreement (NAFTA) made the US dollar achieve its highest rate against the Canadian dollar since February 2016 and hit the point of C$1.3697.