The United Kingdom and its currency are having a good week on the back of positive news regarding Brexit.
The increase in pound however, was so strong and unexpected that investors decided to cash out on a high. Britain reached an agreement with the European Union, which gave hope that a softer Brexit than expected would materialise. The news caused the pound to soar up to $1.352, and it reached a six-month high against the Euro at 86.90 pence. Following the impressive rally during the week, investors were eager to pocket their profit, before any future EU talks could muddy the water. This caused the pound to dip 0.9 percent against the dollar and 0.8 percent against the Euro.
While Britain’s agreement with the EU on Friday was a good sign of things to come, there are still many concerns about the British economy post its departure from the union. Plenty of deliberations are still ahead regarding trade and transition policies. The concern of many investors was noted by Societe Generale’s macro strategist Kit Juckes.
““There’s a sense here that we’re just moving on to the next issue. Have we really done anything more than kicking the can down the road a little bit?” he said. “(But it’s mainly) just a December Friday – no one’s going to go in and buy lots of pounds. We’ve had a decent run and nobody wants to enter the weekend with a lot of risk on the table.”
There is a strong belief that the pound will continue to rise, but nobody, it seems, is willing to take on the risk. For now, investors are content playing the short game.
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