Sterling slipped from a 2-week high to the dollar this morning but was still on track for its strongest week since January as concerns about politics in the United States and Europe took investors’ focus off immediate Brexit worries.
Besides the Brexit bill making its way through Britain’s upper house of parliament, a week largely lacking in major domestic political developments and new economic numbers has given the pound some respite.
Many major banks have predicted another round of selling of sterling if talks on leaving the European Union get going next month, as planned by the government.
While we see good reasons to maintain a negative view on sterling over the medium term, the political uncertainty created by upcoming elections in several euro zone countries this year and the political situation in the US currently seem to overshadow the troubles we believe will be facing the UK economy going forward.
That put sterling up just over 1 percent for the week against the dollar, the euro and the basket of currencies that measures its broader strength.
On Thursday, sources close to the Scottish government said the devolved administration in Edinburgh was increasingly confident it could win a new independence referendum and that it is considering calling one next year.
British Prime Minister Theresa May’s Conservatives secured a landmark victory in a parliamentary by-election on Friday, boosting her hand ahead of the upcoming negotiations as her rivals suffered damaging poll setbacks.