Keeping an Eye on the Pound

The pound is still floating around, not performing well, ever since the triggering of Article 50. It may be a long time before stability is seen and investors feel comfortable investing more. Brexit is still playing heavily on the pound, as is politics around the world, and the uncertainty that these bring has kept the already low pound under pressure.

It seems the pressure on the pound comes from many directions and numerous other countries. Even North Korea, with its missile testing, is affecting how investors interact with the pound. Since the euro is in a stronger, more stable position than the pound, investments seem to be centred more on it than the riskier Sterling. The euro, though, is rallying through all of the uncertainty.

Britain’s construction sector is a good example of how investment slumps can do harm to a sector and the pound. Growth in the construction sector hit a one-year low this month. It was hurt by an investment slump in the commercial sector as Brexit uncertainty weighed in. Data from other dominant service sectors will be very important for attempting to predict where the pound will fall.

Prime Minister Theresa May failed to win a clear mandate at a snap election in June and only has a slim majority in parliament that rests on an agreement with a smaller party. She remains vulnerable if pro-European lawmakers in her Conservative party team up with other parties to vote down legislation or support amendments. Prime Minister Theresa May warned lawmakers over the weekend that Britain could be faced with a Brexit “cliff edge” if they failed to back her EU repeal bill, which is to be debated in parliament on Thursday.

It is being speculated that there is a likelihood of a general election as Brexit talks wrap up late next year. The possibility of another general election and the uncertainty of Brexit, along with other political happenings are all combining to pressure the pound and we’ll have to watch closely as it navigates the political turmoil.