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Updated: 14:46 06/12/21

Sterling reaches strongest level vs the Dollar since Brexit began

By Liam Sheasby, News Editor

17 Apr 2018

Pound Sterling has reached a 22-month high this morning against the US Dollar, climbing 0.2% to hit $1.437 during early morning trading. This new high follows seven days of consecutive gains for the Pound against the Dollar and puts the Pound 15% higher in value than this time last year.

The Pound has since fallen back the 0.2% to $1.432 but is still up 6% since the start of 2018, with Dutch bank ING calling Sterling the “darling currency of the world” as the Pound continues to exceed expectations.

The FTSE 100 is up 27 points at present but has been down over the past week from a combination of the Pound’s boosted value and fears over the Syrian airstrikes. Conflict always breeds concern, but the Pound’s strength puts investors off the FTSE as revenue made overseas then loses value when converted into Sterling.

The rise of the Pound is remarkable considering how severely it fell following the Brexit referendum result, with Sterling registering the biggest single-day drop of any major currency in history as a result. The Pound’s resurgence has been boosted by a combination of the expected interest rate rise from the Bank of England in May and the ‘April Seasonality’ which occurs annually and sees GBP rally regardless of world events. According to Kamal Sharma from the Bank of America Merrill Lynch, the Pound has enjoyed 14 consecutive years of outperforming the US Dollar in April.

The weakness of the US Dollar has also played its part, with the developing trade war between the US and China overshadowing the previous Dollar dampeners of the infrastructure spending plan, large tax cuts, and the Trump Administration specifically wanting a weaker US Dollar in order to rectify the trade deficit by making exports more attractive.

The downside for a weak Pound has been a mix of higher import costs, higher inflation, tighter household budgets, and reduced profit margins for retailers, but UK manufacturing has taken advantage of this with more attractive export prices. This boost has helped the UK economy grow slightly, which in turn has bumped up wage growth figures, reduced unemployment figures, and now helped pull inflation back from 2.7% to 2.5% according to the latest Bank of England figures.

The next big impact on the Pound will come on Thursday 10th May when the Bank of England publishes its summary and minutes from their latest Monetary Policy Committee meeting and the next inflation report, due at 11:00am.

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