Sterling/Dollar rates rose over the weekend close to the best we've seen all year. GBP/USD approached 1.26 before dropping back away today. After the invocation of Article 50 last week, it seems that for the most part, all the negativity surrounding Brexit had already been priced into the rate, with investors seeing little reason to continue hammering the Pound. Will GBP/USD keep rising?
It's impossible to predict of course, but given we've approached these levels several times this year and each and every time it's dropped back again, the trend would suggest otherwise. Indeed the USA are still forecast to raise interest rates several times this year, and higher US rates would strengthen the Dollar and make it more expensive to buy. With regards to Sterling, for the moment focus has shifted elsewhere now that the Brexit negotiations can begin.
As more detail is known about what kind of deal the UK will get, it's likely to start affecting Sterling. Put simply, anything that is perceived as good for the UK should strengthen the Pound, and any indication that the UK will struggle to get a good deal should weaken the Pound.
What could affect rates this week?
From the UK this week, the most important releases are: Trade Balance figures and a GDP estimate on Friday. If the numbers differ from forecast then Sterling could be affected. From the USA the most important things to look out for are: the FOMC minutes on Wednesday, that may shed more light on when the USA will raise interest rates again. Also on Friday we have the all important Non-Farm payroll numbers, that often cause large movements for GBP/USD as they are so hard to forecast.
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