Sometimes as an investor, you wish your Prime Minister or President would keep their thoughts to themselves. Perhaps hold off on that keynote speech about Brexit? Brush over that State of the Union address?
Why? You may ask. Because it plays havoc with your investment strategy, that’s why. And I don’t think the likes of Theresa May and Donald Trump realise what they might be doing to someone’s investment portfolio.
The research from spread-betting firm ETX Capital shows that large fluctuations in the value of the pound can be seen after Mrs May’s speeches.
Source: ETX Capital
Last year, the pound was weak against a basket of currencies, including the euro and dollar. But it is debatable whether this is solely due to Theresa May’s speech-making abilities, or more to do with the volatile nature of the US Presidency and the ongoing Brexit negotiations.
Neil Wilson, Senior Market Analyst at ETX Capital says:
‘Theresa May’s speeches outlining her government’s approach to Brexit clearly have a big impact on the pound’s short-term movements. But longer term her words matter less than what’s happening on the ground in the Brexit negotiations.
‘Furthermore, the biggest impact on the pound is the relative performance of its two biggest peers – the dollar and the euro. The dollar was sliding all [last] year against its major peers, giving a lift to sterling. Meanwhile the euro has rallied for most of 2017 as the ECB moved closer to unwinding its giant stimulus package, leaving the pound trailing against the single currency.’
Announcement of Premiership: July 13 2016
The week after the UK voted to leave the EU, the pound hit 31-year lows against the dollar – but by the announcement of Theresa May’s premiership, it had recovered to trade at $1.