Sterling has had a wild ride this week. At the start of the week, fears that the UK would end up leaving the European Union on October 31 without a deal saw the pound fall to just $1.19. But by mid-week, those fears have faded somewhat, following Parliament agreeing to a new bill designed to avert a no deal Brexit. As a result, the pound has now rebounded to $1.23, the highest level since late July.
Since Christmas, the pound has strengthened against the dollar and other currencies. A pound was worth $1.27 in December, but it was worth $1.33 by the end of February – a rise of 4.5%.
Stockmarkets around the world enjoyed their strongest start to a year for three decades. The S&P 500 index rose 7.8% and 3% in January and February respectively, the best first two months of any year since 1991. That run was broken in the first week of March, as stockmarkets fell on disappointing economic news, particularly US jobs data, downward growth forecasts from the OECD, and the announcement that the European Central Bank feels the need to launch fresh stimulus.
The pound has been particularly weak against the dollar in recent years, as the US economy has steamed ahead while the UK has been dogged by uncertainty around Brexit. The euro, too, is holding up well against sterling, with some speculating the two could reach parity in coming months.
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The respected hedge fund investor has warned a vote to leave the European Union will trigger a heavy sell-off, for stock markets and sterling.