Sterling receives unexpected support
Sterling (GBPUSD) received some unexpected support yesterday following the FOMC statement which appears to suggest a change in tone to a softer approach to the prospects of US interest rate increases. Whilst the Dollar dropped against most of its major trading partners, and notably the Canadian Dollar (USDCAD), the prospects surrounding the UK as the Government tries to head off a Brexit without a trading agreement in place with the EU opens the door to interest rate uncertainties there also. The prospect of “No Deal” has been held out to be a terrifying proposition by all the usual politicians and commentators who obviously regret that the public was ever asked its opinion. In fact, Article 24 of the WTO’s General Agreement on Tariffs & Trade (GATT) allows countries to implement interim measures for up to 10 years so this may turn out to be as terrifying as the Millennium Bug. Despite the escalating arguments from both sides, no-one can say with any certainty what the outcome will be, and this is usually enough to cause investors to turn away from a currency. However, the current Chancellor of the Exchequer is, rather unusually, an opponent of the Government’s policies in this regard. One is inclined to wonder if some smart money here is betting on Hammond manipulating the Bank of England into an interest-rate adjustment, in exactly the same manner that the previous Chancellor, George Osborne, promised a retaliatory “punishment budget” simply for voting to Leave.