Although it is one of the globe’s most traded currencies, the view of Sterling is not universally shared. The perception of UK economic and political events is often viewed quite differently by different audiences. It is like watching a football match. In the stadium we are all watching the same game – but when one side scores there are varying reactions depending on who you support; but the event – who scored and how etc. is the same for us all. Sterling is not “supported” by traders in some countries and not ‘’unsupported’’ by others (ok, that’s debatable but you know what I mean) like a football team, so why is the strength of Sterling sometimes universal and at other times opposing reactions can result? Take November’s Inflation report for the UK economy that was released yesterday…coming in at 3.1% for the first time since 2012. Against the dollar the response has been negative – Sterling weakening after an initial surge; yet against the Euro we have seen strength. The charts above are for the past week – both pretty similar as we rode the Brexit on, then off, then on again journey – hence the Dec 8th peak. So far ,so good – everyone on the same side..but then something changed, and as can be seen from the end of these charts when the inflation report was released – sides have been taken and opposite reactions recorded.
To know why would be nice, but equally useless. A trader and most market commentators can always tell you after the event why it happened…trick is to know what the response will be before..and that is what makes FX so unpredictable, Brexit or not. That was why the FX market created “Forwards” so that you can take the guess work out of wondering what the exchange rate will be when the bills require payment. Fix them in advance and get back to the day job knowing you have your profit margin covered or the rate you want on completion of that property purchase secured – regardless what happens thereafter. DS – not just a broker.