It was a busy week for Sterling traders with Brexit events in full focus, sparking volatility and eventually net wins against the major currencies to make it the pound to rule them all this week!
Major Market Drivers for the British Pound
It was all about Brexit this week for Sterling pairs and for those who haven’t caught up on what Brexit is and the latest developments, you can read a pretty good explanation of the whole Brexit situation here.
So, what happened this week? Basically, the deal struck between the U.K. government and the European Union on how the U.K. would leave the EU was voted on and rejected by Parliament this week. In the hours leading up to the vote, the British pound saw strong and steady weakness, likely due to the widely expected rejection result that we saw in the Tuesday afternoon U.S. session.
After the vote though, Sterling pairs immediately went into rally mode, possibly on the notion Theresa May would (and eventually did) win the no confidence vote proposed by Labour leader Jeremy Corbyn immediately after the Brexit vote. There’s also an argument that Sterling rallied on the idea that the disastrous “no deal” Brexit outcome is less probable and that alternative scenarios may be considered like an extension of Article 50, or even a second referendum vote.
The rally in Sterling continued into Friday where we finally saw a pullback that could be attributed to the dismal U.K. retail sales data that showed retailers had their worst Christmas season in a decade. This possibly brought traders back to focus on economic data, which has been terrible for the U.K. with low inflation data, plummeting demand for credit, and falling home prices popping up on the calendar this week.
United Kingdom Headlines and Economic data
- UK inflation falls to lowest level in two years
- UK lenders see demand for mortgages, credit cards plummeting before Brexit: BOE
- Retail sales volumes fall by 0.9%; worst Christmas in a decade
- UK house prices fall at fastest rate in six years on back of Brexit – Rics