2017 has been quite a bumpy ride for the Pound Sterling exchange rate, with plenty of peaks and troughs as Brexit negotiations continued and economic data continued to disappoint. We’re looking at how the British currency has fared in Q4, and what could lie ahead.
Brexit has to be one of the most powerful influencers of Sterling and is likely to remain a strong manipulator in the months to come. As Theresa May battles political infighting and unruly Cabinet members and tries to strengthen her negotiating position with the EU to get Britain the best deal possible, the pound is expected to experience some swings.
The Pound has experienced a few rallies in Q4, mainly on the back of Brexit optimism, and sometimes climbing by over 1.0% at a time.
UK data has been a mixed bag too, with UK mortgage approvals hitting a 13-month low, and inflation reaching a near six-year high at 3.1%. Wages have also noted some growth coming in at 2.5% on the year – good news for those Britains experiencing a significant household squeeze. The UK manufacturing sector also saw growth reach its strongest level in four years, while consumer credit expansion lagged behind at its lowest level in 18 months.
Quarter four saw the pound to Australian Dollar (GBP/AUD) exchange rate hit a 14-month high. Meanwhile, the GBP exchange rate also earned itself the title of best-performing currency in the Group of 10 (G10) in November, reaching levels of 1.35 against the US Dollar (GBP/USD) and 1.14 against the Euro (GBP/EUR). On a trade-weighted index basis, Sterling reached a six-month high at the start of December.
Q1 2018 GBP Forecast
As markets enter 2018 and the clock ticks closer to the Brexit deadline, negotiations could create even more dramatic currency movements as investors speculate as to whether the UK will see a hard or soft Brexit. All eyes will be on Theresa May and her shaky position, to see whether she truly can deliver the Brexit many are hoping for, and give the Pound exchange rate a boost in the process.