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Sterling hits one week low

Sterling slipped to a one-week low against the euro today, as the single currency soared on talk that the European Central Bank could start to change its message of expansionary monetary policy in the coming months.

According to the minutes of its latest meeting, the ECB should revisit its communication stance in early 2018, suggesting that policymakers could soon start preparing markets for the end of the bank’s massive stimulus scheme.

Analysts said the pound was also given some support by speculation that a second referendum on membership of the European Union could be held after Former UK Independence Party leader and prominent Brexiteer Nigel Farage said he was warming to the idea of holding a second ballot.

If another referendum were held, therefore, or if the need for one became the consensus view, sterling would climb towards $1.40 or even higher than that.

The possibility of a second Brexit referendum or further BoE (Bank of England) tightening is definitely not priced by the FX market.

UK Economic data has hurt the pound this week, with the British trade balance for November widening to its biggest in five months.

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