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GBP: Could Trump help with a softer Brexit?

By Ricky Bean November 10th, 2016

Price action over last 24 hours has been erratic as the market takes it time to assess the implication of a Trump victory, the first ever US President with no political or military experience. At first glance the battle was won very much on the same principles of Brexit: immigration and protectionism. Given that Trump favours the UK and could potentially influence the type of Brexit the UK has, could this change the outlook for the UK economy?

As expected, sterling strengthened initially against the US dollar with a Trump victory, but by the afternoon sterling had given up its gains. Against the euro the reverse happened with the euro initially strengthening but as the day wore on sterling strengthened, hitting recent highs by the end of the day.

UK trade deficit data was released yesterday. Due to the US elections, it had minimal impact on currency markets. The trade deficit shrank in the first three months after the country’s European Union referendum to £11bn in the quarter to the end of September, down from the £12.7bn figure recorded in the previous three months, which was the highest level since the end of 2013.

Looking ahead, we have a quiet day ahead in terms of significant data releases from the UK. However, the rhetoric surrounding an uncertain era of politics will dominate headlines – and, potentially, currency markets.