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Pound good term long term bet
Published on 12.04.2017 22:50

The British pound received a boost today before pulling back late in the trading session after a round of data that sent mixed signals to investors.

At 5.19pm (GMT) the British currency was trading at $1.2496 against its US counterpart, slightly up from $1.2495 in yesterday’s trading.

Figures out earlier today from the UK showed the unemployment rate holding steady at 4.7 percent while the average earnings Including Bonuses hit the market at a steady 2.3 percent ,above analysts’ expectations for a  figure of 2.2 percent, but down from the previous months figure of 2.4 percent.

Although the figures look good on the surface, wage growth is now trailing inflation, and many predict the situation will become worse, which will put immense pressure on British consumers,

"The better than expected print saw sterling rise moderately against the dollar and euro, however the outlook is far from rosy for the rest of the year," said Jake Trask, FX research director at OFX.

"Inflation is expected to push towards 3% over the next few months as sterling's huge depreciation since the Brexit vote begins to be felt in full. It is very unlikely wages will be able to keep pace, leading to a squeeze in the spending power of UK shoppers" .he added.

Although the British pound is expected to be volatile as Brexit negotiations are hammered out with the UK and EU trying to each get the best deal possible, some  analysts are predicting a rebound in the long term once the dust settles,

“Sterling is going to be extremely noisy for the next two years, heightening the chance of an errant statement or misconstrued rumour eliminating value from what could be a profitable longer-term position.” noted Jeremy Cook, chief economist of the payments provider World First.


Andrew Masters

Analyst

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