2016 has been a year full of surprises, which have had a major impact on the currency markets. Two events stand out: he UK voting to leave the EU and the USA voting to elect Donald Trump as the next US President.
The Pound has generally been struggling since the Brexit vote in June, and in October it became the worst performing G10 currency. However, it has so far had more positive November, enjoying its best fortnight in several years with Trump’s election giving it a boost.
Trump wins; markets react
When it first became clear that Trump had done better than expected the markets went into risk-aversion mode and the Dollar fell against the Pound and the Euro.
However, while Trump may have promised to deliver “Brexit plus plus plus”, with pledges to renegotiate trade deals, the overall market reaction appeared to be calmer than when the UK voted to leave the EU. This suggests the victory came as less of a surprise to investors than the Brexit vote did.
Pound gains against the Euro
As the markets settled, the Pound strengthened against 31 other major currencies. This is believed to be at least in part due to suggestions that Trump’s victory could be positive news for a post-Brexit Britain.
Meanwhile, concerns have started to be raised around the Euro as attention turns towards upcoming political events in Europe over the next year, such as the Italian referendum and elections in France, Germany and the Netherlands.
Brexit concerns remain a risk for the Pound
There was, however, a reminder this week that Sterling continues to remain vulnerable to negative Brexit news. It weakened following media reports of a leaked memo suggesting that Britain had no overall plan for Brexit.
What next for the Pound?
For both Trump and Brexit, it is unclear what will happen next, so we may have to wait until next year for some certainty.
But rather than studying the headlines or constantly checking the rates, you can allow HiFX to be your eyes and ears in the market. You can monitor your currencies with our easy to use customisable currency charts and tools or log in to your HiFX account to get live quotes and set up personalised rate alerts.