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Pound on track for best week in a year

Emma-Lou Montgomery

Emma-Lou Montgomery - Fidelity Personal Investing

The pound looks set to end the week the strongest it has been in a year after hopes grow that the Prime Minister will reach some sort of Brexit deal.

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Sterling has so far rallied 2% this week against the dollar, and that’s the sharpest rise since late last January. This morning it was continuing to strengthen against the Euro, consolidating this week’s 3% rise to trade at 1.1558.

Theresa May is under increasing pressure to rule out a no-deal Brexit and Chancellor Philip Hammond’s comments at Davos on Thursday seemed to suggest that was the way things were going.

He told the audience at this year’s World Economic Forum meeting of global leaders that “not leaving would be seen as a betrayal of the referendum decision, but equally leaving without a deal would undermine our prosperity and would equally represent a betrayal of the promises that were made.”

Mrs May is, of course, not there. Nor is US president Donald Trump.

However, the week’s events, coupled with Mr Hammond’s speech, seem to have provided reassurance enough for the markets that Britain is ploughing ahead with Brexit and a deal is on the cards.

The pound was 0.5% up at a peak of $1.3139 in late trading on Thursday and that’s the highest it has been since early November.

Sterling has remained sensitive to Brexit updates but better-than-expected wage and employment figures earlier this week also helped boost sterling. Figures from the Office for National Statistics (ONS) showed that a record number of people are in work in the UK, while average earnings are at the highest they have been for a decade.

Markets will remain focused on how the UK leaves the European Union so further ups and downs are likely until a final decision has been made on the UK’s Brexit strategy. And while a possible no-deal Brexit still hangs in the balance, we’re likely to see the pound fluctuate.

It’s not just economic data and political machinations that have an effect on sterling. There are also pressures from business, as we’ve seen this week, when the chief executive of Airbus piled on the pressure by warning of the possible impact of a no-deal Brexit.

All this uncertainty certainly makes life tricky for investors. But as time has shown, it’s better to be in the market and stay invested with a diverse range of assets in your portfolio, across a range of countries, so you’re already in position to take advantage of the upside - when it comes.

Important information

The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.