Following Donald Trump’s victory in the US Election 2016, the British Pound continues to regain ground lost in the initial aftermath of the 8th November’s result.
This news is sure to be music to the ears of businesses who import goods and holidaymakers buying foreign currency. For the first time in five weeks, the british pound sits steadily at a worth of $1.26, a significant rise from its previous $1.21 last month.
The pound has also risen by over 6% in the same period, rising from €1.09 to €1.16. This figure increased when figures on the Construction Industry were published, which came as a pleasant surprise when negative expectations were in place.
It’s been speculated that the US Election put any concerns about Brexit ‘on the back burner’. President Trump also offers the potential for great trading relations with the US. Currency firm Speaking to the BBC, Caxton FX’s Chief Executive, Rupert Lee-Browne, commented “This is definitely a rebound after some very positive comments from President-elect Trump. He’s indicated he wants America and the UK to continue with the special relationship, and that has lifted spirits in the currency market.”
Meanwhile in Europe, worries about political stability creep across the continent – Italy is currently facing a referendum to decide on a constitutional reform, and France is on the cuff of a Presidential Election, due to take place in April 2017. The british pound’s recovery has also been assisted by the High Court in Britain forcing a parliamentary vote on Article 50 which puts Brexit into motion. Trump’s seemingly potential trading opportunities with Britain softens a presumed “hard Brexit”, which previously ran the risk of Britain leaving the EU without a solid trade deal to support it.
Speaking to the BBC, CMC Markets’ market analyst Jason Lawler cited, “There’s an element of simply a shift in focus behind this. The phenomenon of Donald Trump as US President-elect has put Brexit on the back-burner, allowing the pound to creep higher.”
It was speculated that US interest rates would rise when the US’ central bank, Federal Reserve, holds its next meeting in December 2017, which it’s hoped will strengthen the dollar. Across the pond in the United Kingdom, higher inflation expectations mean higher interest rates, making the pound a more attractive investment. However, Brexit is somewhat of a dark cloud on the horizon, which, going forward, could bring the pound down – only time will tell.
Despite the pound’s recent success, it’s still considerably below where it stood last year, at $1.52 and €1.42.