It’s been a difficult week for the Pound and the ongoing uncertainty over Brexit is causing volatility.
Any hope for a conclusion bringing clarity, was beneficial to the Pound - but optimism was short lived after a new headline highlighting the impasse in parliament superseded any positive news.
A month is a long time in Brexit negotiations
Early in the month, the Lords passed an amendment to a trade bill, requiring the Government to join a customs union after Britain leaves the EU.
The move reawakened investors' faith that a no-deal Brexit will be avoided and gave the Pound a boost. However, nothing from the House of Commons appeared to give much assistance. Parliament appears to be in deadlock and while Theresa May managed to secure an extension to the 29th March deadline, a conclusion didn’t appear to be on the horizon.
Political drama and sterling volatility
As the month drew to an end, there was some optimism that an end to the uncertainty was in sight, but a series of indicative votes, in which MPs failed to agree on any option, pushed the Pound lower. A third vote on the Brexit deal also caused volatility because, despite some dramatic resignations and changes of allegiance within the Conservative party, it still remained unclear what the outcome would be.
Economy expanded 0.5%
Against this backdrop, the economic numbers didn’t have an impact, perhaps because they presented a mixed picture. The purchasing managers' indices for manufacturing, construction and services were inconsistent: manufacturing slowed, construction declined and services beat the forecast. Overall, the economy expanded by a monthly 0.5%. Inflation ticked up to 1.9%. Unemployment fell to a 44-year low of 3.9% and wages were up by an annual 3.4%. Retail sales surprised on the upside, increasing by 0.4% in February.
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