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The British Pound's Best Day Since 2008, Explained

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The British Pound's Best Day Since 2008, Explained

The British pound recorded on Tuesday its best single-day performance since 2008.

Bloomberg's Richard Jones explained during Tuesday's "Bloomberg Daybreak: Americas" segment that there are several moving parts which support the pound's gains of nearly 3 percent against the U.S. dollar.

What Made The Day's Success Possible?

Jones noted that the most important factor contributing to the gain is the fact that the British government managing market expectations when the country's Prime Minister Theresa May offered a speech in which she clarified the government's position regarding the Brexit process.

"I think in terms of the tone of the speech, I think it was much more conciliatory than people were expecting and I think it was also inclusive," he explained. "There was mention of parliament, there was mention of the devolved United Kingdom having their views taken into account by the prime minister."

Jones also noted that President-elect Donald Trump's comments that the U.S. dollar is too strong also contributed to the pound's gains — although the U.S. dollar did fall against other global currencies such as the euro.

What About U.K. Economic Data?

Jones continued that it might be erroneous to start turning toward any U.K. economic data as a driver for the pound and its value will be determined in the near-term by politics — both domestically through the Brexit process and internationally.

Jones noted, however, that the Bank of England's chief Mark Carney did strike a cautious tone in terms of economic prospects in the U.K. Specifically, the Canadian-born economist who now leads the country's central bank cautioned of headwinds to consumers and households given the fact that their purchasing power will be reduced because of the decline in the pound.

Posted-In: Bloomberg BrexitNews Eurozone Forex Markets Movers Media Best of Benzinga

 

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