Pound boosted by PM comments
- Posted by Shyam Gokani in Uncategorised
- November 22, 2016
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Sterling surged more than a cent against the dollar yesterday and to its highest since early September versus the euro as the market processed Prime Minister Theresa May’s latest hints on the possible shape of Britain’s exit from the European Union.
Speaking to business leaders on Monday, May pledged to address concerns that Britain could fall off a “cliff edge” into uncertain trading conditions when it leaves the EU.
That had little immediate impact on sterling until the arrival of U.S. investors around lunchtime in London, at which point the currency surged by a full cent in less than a minute.
Sterling marked its third consecutive week of gains against the euro on Friday.
The steadier tone has come as several banks begin to argue that a 20 percent fall since last December may prove enough to balance out Britain’s large current account deficit and much of the risk stemming from June’s Brexit vote.
Many banks, including HSBC, Goldman Sachs and Morgan Stanley among others, continue to call for falls below $1.20 in the months ahead.
This week’s big set-piece is the British government’s autumn budget statement on Wednesday and there are varying views on the likely outcome for markets and the pound.
Hammond said in a BBC interview he wanted to keep some fiscal “headroom” as two years of difficult negotiations about leaving the EU approach.
Analysts expect some modest infrastructure spending and housing stimulus from Wednesday’s statement but nothing that would radically change expectations of a weaker economy next year when difficult talks begin on the terms of Brexit.
Public finances are not in good shape and Mr Hammond has no appetite for a major increase in borrowing.
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