Times have been very tough for the pound Sterling ever since the Brexit vote results came in. After months of struggles and downward trends it looks like things may slowly turn around. This week has been rather positive across the trading platforms, indicating a significant change compared to March of 2016. With a 2.5% gain against the US Dollar this week, the Pound Sterling shows signs of recovery.
The Pound Sterling is Not Out of The Woods Yet
Establishing a positive trading spree against the US Dollar is impressive, but that does not make all problems go away by any means. For the Pound Sterling, this past week has been quite positive, but there is still a long way to go. With the new High Court ruling addressing the economic fallout of the Brexit, investors are cautiously optimistic once again.
To be more precise, the UK government will require parliamentary approval to execute Article 50, which is the clause to start the departure from the EU. Since there has been a lot of talk about reverting the Brexit decision, this news indicates that the “breakup” will not be formalized anytime soon. Whether or not that is a good thing for either party, remains to be seen.
Contrary to what financial experts believed to be true, the Brexit has not done the Pound Sterling any favors. Avoiding an economic catastrophe remains highly unlikely, depending on whether or not Britain retains access to Europe’s single market. Failure to do so may send the Pound Sterling in a downward spiral without end.
At the same time, this positive trading trend can not solely be attributed to the Pound Sterling itself. With the US Presidential elections drawing near, fears over a Trump presidency make the US Dollar look less stable compared to a few weeks ago. Markets respond in funny ways when it comes to political news, and politics can turn markets upside down in a heartbeat.
People have to keep in mind that this may very well prove to be a reprieve for the Pound Sterling. The Brexit decision is far from finalized, regardless of the outcome. Until there is a clear sense of direction, the markets will remain very volatile on a daily basis. There is no such thing as financial stability during these tough economic times.
One silver lining in all of this is the recent decision by the Bank of England to not cut interest rates. Additionally, they improved the forecasts for 2017 growth. Then again, a forecast is just an indicator of wishful thinking, and the result may be very different. Currently the Pound Sterling is still facing a 16% deficit against the US Dollar, and a 14% deficit against the euro.
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