Sterling still riding high against the Euro
Rates have practically been unchanged for 48-hours now and the recent UK data was unable to create much volatility either. This means a consolidation period for the £ then, that is finding it hard to breakthrough the £-€1.18 resistance barrier and push onto £-$1.37 levels at the moment. We believe both pairs are priced correctly for the time being with the former attractive to buyers at the 19-month high.
There is some noise on potential headwinds for Sterling, but first to the UK data released recently. Job vacancies are at record highs as 1.1 million jobs became available between July and September. 207,000 people were added to payroll in September, leaving the unemployment rate at 4.5%, not far from pre-pandemic (4%). UK GDP grew 0.4% in August as forecasts predicted and now remains just 0.8% below pre-pandemic levels. The figure was robust enough, but economists are concerned about overall growth numbers in Q3 & Q4.
Analysts at Barclays are suggesting there are downside risks just around the corner for the Pound and are not expecting its value to rise from the current positions. Brexit tensions are slowly coming back to the table and they expect that this and a potential policy mistake from the BoE raising rates too soon, could hurt the £ in the coming weeks.
Yesterday, Brexit Minister Lord David Frost said, 'if the EU does not move significantly, the UK may trigger Article 16 of the protocol' (tariffs on trade and/or the suspension of parts of the treaty). HSBC too have weighed in on the £ and believe it to not be 'cheap' at current prices. Analysts predict high inflation and low growth is here to stay and could work against GBP in the coming months.