Sterling surprises on Brexit hopes

• Brexit positivity peeks through the political storm clouds
• Euro yo-yoing against its currency partners
• What next for fallen USD?

The week started with Sterling in a slump, followed by a surprise spike on the afternoon of Tuesday 19^th February, as Brexit resolution hopes ran high. The Brexit negotiations continue, and will be the key driver for the Pound’s performance in the coming days and weeks.

Brexit positivity peeks through the political storm clouds

UK politics is also continually full of surprises, with eight politicians now leaving the Labour party to form an independent group and three Conservative MPs following suit. Brexit may or may not be the real reason they are leaving their respective parties, but the political uncertainty is not going to support the Pound while the situation remains so uncertain.

Euro yo-yoing against its currency partners

Meanwhile, in the EU, the Euro hasn’t exactly been basking in the sunshine, either. Once again, the International Monetary Fund (IMF) has commented that the growth outlook, this time for Germany, is likely to be downgraded. European data hasn’t disappointed so far this week, though; in fact, the consumer confidence results were surprisingly positive, offering a rare glimmer of hope for the generally gloomy European economy.

Thursday is a key data day for the EU, when January’s Eurozone inflation report will be released. Market commentators expect the data to be lacklustre. The European Central Bank (ECB) will be looking for 2% inflation to be able to increase interest rates. It will be interesting to see if the Euro gets chance to strengthen against the Pound and US Dollar following events taking place outside Europe.

What next for fallen USD?

The US Dollar fell from grace on economic concerns and continued uncertainty about US-China trade tensions. The talks are going well, by all accounts, but, as with Brexit, the world is watching and waiting for something more concrete.

The Federal Open Market Committee (FOMC) meeting minutes will be announced at 7:00pm (UK time) and are awaited with anticipation by the markets, as debate continues over whether the Federal Reserve will continue along its more cautious recent approach or will take a more proactive view. There is likely to be volatility ahead, so take a deep breath and hold tight…

Dollar Down under dives too

And back Down Under, the Australian Dollar has also slumped, thanks to Australia’s own economic concerns, a housing slump and a cautious central bank. This has helped the Pound rise against its Aussie counterpart to the impressive 1.80 level.