Sterling Starts The Week Strong But Gets Sold Off To Drift Back Down


Sterling exchange rates have had a mixed trading week so far, with the pound reaching fresh 1 year highs against the Euro early on Tuesday morning only to drift back down again as the week rolled on.

Analysts have suggested that the pound may have been overbought as positivity surrounded the U.K earlier in the week, whereas there has been a surprising demand for the Euro at the end of the trading week, seeing the single currency have a rise in value in the last 24 hours against all but 2 of the G10 currencies.

Sterling Feel Good Factor

Overall though, there does appear to be a feel-good factor surrounding the pound at present and investors are certainly beginning to favour the currency over many other majors, with the pound being one of the better performing of the G10 currencies in 2021 to date.

The sheer pace and positivity surrounding the vaccination program in the U.K appears to be one of the main driving factors behind the gains we have seen over the past few weeks and with the addition of a clear roadmap for how the U.K may head back to some sort of normality in the coming months, it is easy to see why investors and speculators may now be favouring the pound over others.

Another reason why we have seen the pound have a good start to 2021 is due to the uncertainty of a no deal Brexit being lifted, which is a factor that has been keeping the pound low for over 4 years now. There is no doubt that there may still be further bumps in the road regarding the Brexit trade deal and the U.K leaving the EU but the mere fact that the road does not have a potential cliff edge fall at the end of it has settled investors and given them a little more confidence in the U.K and Sterling as a whole.

No Guarantees That Sterling Will Get Stronger

There are still a number of potential suitors to dampen the pounds sprits so it is important to be aware the there is no guarantee that the pound will keep getting stronger, the most notable being next week’s budget, any new mutation of the virus, any new post Brexit issues or a vast increase in cases which might slow the journey back to normality and economic growth down.

We have very little out in terms of economic data today for the U.K so the focus will likely be on vaccinations and any other leaks surrounding next week’s budget, which is a key date for your diary and due on Wednesday 3rd March.

Glenn Tullett | Senior Business Development manager – Spain | Foreign Currency Direct

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