Sterling Pulls Back After Strong Surge

The pound was down on Friday after climbing up to a near five-week high. Despite the pull-back, it is still on course for one of its best weeks since mid-November. The pound has been performing well as it seems much of the concerns over Brexit have been parlayed, as investors focus on the growth of the economy, which has defied all expectations. It appears the Brits are little concerned about what happens beyond its shores, as consumer confidence in January had the highest monthly increase since last year summer. Data showed that the economy also grew at a favourable pace to close out 2016. All eyes are now on Moody’s, to see if it would reduce the UK’s credit rating. The bond credit rating company has had a downgrade warning since the announcement of the Brexit last June.

Meanwhile, the Bank of England’s trade-weighted index also witnessed a modest drop of 0.1 percent to pull it down from a five-week high. However, the index is still up 2 percent for the week. Another dip came in the exchange rate, where the pound lost 0.5 percent to the dollar for its largest daily drop of the week to settle at $1.2533. it would’ve made the second week in a row of a rise of more than 1.3 percent. The euro was another beneficiary of the slip, after the pound had gained 1.5 percent against it for its highest level since mid-November. “The reality is people are still edgy ahead of a credit rating review that is expected shortly,”Societe Generale strategist Kit Juckes. “On top of that the dollar has got a bid more than a sell on it today.” The hard exit remains a major concern for investors, as the Prime Minister has all but confirmed that it is inevitable. Prime Minister Theresa May is to meet with the newly elected president of the U.S., Donald Trump. If the U.S. is able to sign a new and favourable trade agreement with the United Kingdom, the economy will keep up with its resurgence.