The British Pound Sterling has slumped in value in the run-up to the Autumn Statement. However, analysts posit that it is still too early to call an end to the short-term recovery rally seen over recent weeks.
GBP is seen struggling ahead of Wednesday’s Autumn statement as traders pare back exposure to the currency in the event of another politically-inspired bombshell being dropped, PoundSterlinglive reports.
Sterling has gone from hero to zero in the short space of 24 hours having been the G10’s best performer on the 21st November to the club’s worst performer on Tuesday, November 22.
GBP outperformed its rivals at the start of the new week following comments made by the UK’s Prime Minister that a transitionary period is being mooted for businesses to adapt to Brexit.
The idea is that there would be some Norwegian-style period that sees the UK comply with EU laws in order to maintain full access to the single market ahead of a complete withdrawal.
Whatever the case, the Pound found favour against its continental peer and extended its multi-week rally.
“The UK currency gained ground against the Euro for the third week in a row as market participants took the view that Sterling was far more likely to track the Dollar than the single currency in the coming months,” says Bill McNamara at Charles Stanley, the London-based broker.
The Bank of England has also made it clear that the current economic situation does not merit additional rate cuts or further quantitative easing which would be supportive to Sterling as reduced demand for UK bonds by the Bank would in turn push interest rate yields higher.
