One of the most provocative topics affecting the pound’s value, is of course Brexit. For example, when the post-referendum rhetoric was tilted towards a ‘hard Brexit’ the pound fell and on talk of a ‘soft Brexit’, the opposite happened. These fluctuations have clearly shown how the uncertainty which surrounding a move towards a hard Brexit is likely to impact on the economy negatively. As a result it is now more likely that we will see the government seek a softer, sterling-friendly Brexit for the sake of a healthy UK economy.
The snap general election also had a major impact on the performance of the pound this year. When Theresa May initially called the election on the 18th April, the value of the pound fell the hour before her announcement. Following the announcement however, where Theresa May expressed a strong commitment to seeing the Brexit negotiations through to the end, the market showed a clear liking of her sentiment and sterling soared as a result, rallying up to over 3% against the dollar.
With the June election resulting in further political uncertainty, the value of the pound fell again as traders and investors bought into a Conservative landslide which simply did not materialise. However, despite ongoing Governmental and Brexit talks, the pound has once again gained ground and recovered all of the losses suffered from the election disappointment.
Since June, we have seen the pound find 11-month highs above 1.31 against the dollar. Overall, the pound has been resilient and when it has fallen in the last couple of months, the move has only been a short correction and has been the catalyst to buy the pound at lower prices, which in turn has strengthened the currency. The more certainty we have on the newly-formed minority government and Brexit negotiations, then the more likely it will be that the pound will continue to strengthen moderately, but not as high as it was before the EU referendum.