Pound gains seemed to have been biased towards an overwhelming weakness in the euro; Politics intervenes to make things a little more interesting. Yesterday's UK trading session saw a huge 1.15% rise against the euro and 0.95% against the dollar, closing above 1.2050 and 1.3060, respectively.
The story originally focused firmly on the general collapse of the euro sentiment in view of likely ECB rate cuts. At noon, however, the reluctance to reshuffle the cabinet exploded to the full. While the reshuffle itself was never meant to ruffle feathers in the currency market, as all elected conservative MPs had to sign a Brexit pledge before being nominated in 2019, the shock news of the day was that Savid Javid, the Chancellor of the Treasury, had done so resigned amid the takeover of number 10.
The market's reaction to the upward trend centered on the fact that the now ex-chancellor was interested in governing some of the free spending projects envisaged by number 10 to "level" the country. By placing their desired candidate in 11th place, the markets boomed with the notion that number 10 will now find its way and provide the much-needed infrastructure changes needed to support Johnson's post-Brexit economy.
It remains to be seen whether this newly discovered pound positivity will continue in the short term as markets begin to take profits above the 1.2000 GBPEUR and 1.3000 GBPUSD marks. Prices like this have not been available since the election, and when they were made they dropped immediately.
At the time of writing this morning, we had already lost 0.30% against the euro and 0.25% against the dollar. Call us to discuss how you can include some of the mood before the weekend as this can be the difference of thousands of pounds.
Have a nice weekend,
Author: Joshua Haden-Jones, Senior Relationship Manager
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