First of all, I would like to wish you all a happy new year, and I hope you are all well rested after the break!
2016 was an extremely eventful year for the currency markets, making the pound the most volatile out of the G10 currencies due to the uncertainty of "Brexit"- which, unfortunately, is still a word we will be hearing a lot for the foreseeable future.
Staying on the topic of Brexit, this month the verdict of the Supreme Court appeal will be announced; the market is hoping for the verdict to remain the same as the High Court's , which suggests that the UK will move for a "soft" Brexit when triggering Article 50. The opposite result could prove to be damaging to the pound. As traders are already weary of trading the UK currency, any more uncertainty surrounding Brexit would mean it would be wiser to stay clear of the pound for now.
British PM Theresa May has also stated that she will trigger Article 50 by the end of March, which means that this could happen anytime over the first quarter of this year; it is, for this reason, I will remind you that it would be wise to stay protected, as I have a feeling there will be no warning before this happens. The potential market reaction for this is up for speculation, so we could argue that the pound would strengthen due to the UK finally making a decision, or we could argue that all this time the markets felt Brexit may not happen, and now it is, the pound would weaken further.
Alongside politics, the UK economic data will be of significant importance this year; we have already begun to see contractions in the UK's GDP figures and a rise in our inflation, we expect this trend to continue which could be bad news for the pound, and as the BoE aren't expected to raise or lower interest rates this year, it will be interesting to see how they manage to calm the markets if the above happens.
Moving onto Europe, we may see that politics begin to control the movements on the euro this year, with the upcoming elections in France, Germany and the Netherlands. We are beginning to see a change of narrative in politics worldwide, which is giving markets (and the public) a cause for concern due to the uncertainty of the directions some countries may go in. This is something we will monitor as things happen and report to this website as and when we have information for you.
Last of all, Donald Trump and the Fed; President Elect Trump will finally be inaugurated in January and will officially become the President of the United States. Since the election, the U.S. dollar has rallied against most currencies, and with the Fed's interest rate hike in December this has continued. I will personally be watching how many interest rate hikes the Fed will look to do in 2017. They are forecasting around three, and as many of you know, their forecasts and reality never seem to be the same so we may see some reversal in dollar strength.