Are Sterling Traders Overlooking UK Economic Reslience?

Pound investors are increasingly ignoring signs of strength in the U.K. economy as political risk surrounding the nation’s exit from the European Union dominates the currency’s outlook.

The pound showed little reaction on Thursday immediately after a gauge of the country’s services sector beat the median forecast of economists in December, rising at the fastest pace in more than a year. The initial muted reaction marked a contrast to data in the immediate aftermath of June’s referendum, when smaller beats, or even reports that matched estimates, were enough to cause a bigger reaction.

With Prime Minister Theresa May’s self-imposed March deadline for formally triggering the U.K.’s exit fast approaching, the better-than-expected performance of the economy has been overlooked, with bigger swings in the currency coming after relatively minor developments in the nation’s path out the the trading bloc. The pound has fallen about 17 percent since the decision to quit the European Union, and dropped to $1.22 on Tuesday, the lowest since Oct. 31.


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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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