GBP 2017 outlook: Recovery against Trump trade is doubtful

Political events continue to override the influence of economic data and this is no more apparent than in the UK right now. Based on these developments, what is the GBP 2017 outlook

16 January, Xtrade – Recent economic numbers have been rosy, with Q3 Net Consumer Credit clocking in at an 11-year high, and strong quarterly retail spending growth also performing impressively. However, that’s just a fading ray of light in what looks to be a very dark and stormy 2017 for the UK economy.

There is no end to the Brexit conundrum 

The Brexit conundrum looks set to linger much longer than many anticipated, with no swift resolution likely, and that’s holding the pound back more than anything else. Prime Minister Theresa May looks to be leaning on the side of a ‘Hard Brexit’, making a full withdrawal from the single market likely. The reaction to that has been prickly.

HSBC, for example, has suggested a break away from barrier-free trade with Europe could see them hop The Channel and pitch up their HQs elsewhere, leaving businesses and jobs at risk.

GBP 2017 outlook: Wait and see approach

Until March, the prospect of a Supreme Court decision in the Government’s favour is likely to starve off any enthusiasm for the pound. Further still, if the ruling does hand May the power to trigger the all-important Article 50, then the pound could drop sharply. Analysts will be taking a wait-and-see approach here. In overall, the forecast is for sterling to continue to show signs of weakness against the dollar. Any near-term recovery against the Trump trade is doubtful, and a continued drift lower likely.

GBP 2017 outlook, GBPUSD Daily GBPUSD Daily Chart (Click to zoom in)

Though traders are likely to sit on their hands and wait for Trump to elaborate on his economic plans before taking a run at the dollar, the world’s largest economy arguably holds a firmer footing than the UK and Europe heading into the new year, and the prospects for its currency look more stable. On the continent, look for GBP to maintain its relative strength against the euro and to rise upon anything dramatically untoward.

Political events are the key impact factors

There are significant issues for the single currency, with competitive and contentious elections on the continent. Coupled with an ill Italian banking sector facing a number of perils. However, inflation creeping up of late will certainly be a welcome development for ECB boss Mario Draghi. As the ECB president has been trying to pump life into the eurozone for some time.

But, again, it’s the political events that are causing a stir on the trading floors. Elections in France, Germany and the Netherlands will heighten the feeling of instability. Hence, it’s difficult to see the euro making any ground on the pound in the short-term.

About Xtrade

The GBP 2017 outlook was provided by Paul Sirani, Chief Market Analyst at Xtrade. Xtrade is an award-winning brokerage that offers CFD trading on stocks, indices, commodities, and currencies. Its cutting-edge technology, available on both desktop and mobile devices, includes five digital trading platforms. These are accessible to traders across Europe, Asia, and Australia in over 40 languages. The company also offer a sophisticated trading education centre, real-time financial news, and innovative trading tools. Xtrade’s Global Ambassador is Cristiano Ronaldo of Real Madrid, who features on the company’s digital hub. Xtrade possesses over a CySEC license, in accordance with the EU’s Markets in Financial Instruments Directive. But also holds the Australian Securities and Investment Commission, and South Africa’s Financial Services Board licenses.

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