Senior Market Analyst Craig Erlam said despite the Brexit uncertainty over a soft Brexit or no deal Brexit the pound has risen significantly against the dollar to its highest level since November. During an interview on BBC News, Mr Erlam explained how the FTSE 100 had dipped as the pound had seen an uptrend. He said: “We are looking across the European markets right now and the FTSE very much underperforming its peers. We often see when we see a pound rising, the FTSE does fall.
“This is associated with the fact that the FTSE 100 index is a UK index but is very much an outward-looking index and around three quarters gained by its companies come from abroad.
“So, when these are converted back to pounds it offsets as part of the gains we see here.”
The BBC presenter then questioned what impact Brexit was having on the pound’s strength and other figures such as the data released on pay figures across the UK.
Mr Erlam responded: “I do think that’s feeding through partially but it is very difficult to look past the Brexit situation right now.
“The Bank of England whether it raises or cuts interest rates is going to depend far more on the Brexit outcome than it is then one month of employment data.
“The employment data is extremely encouraging and should we see a smooth Brexit with a transitional period than it, of course, becomes much more relevant.
“Then again if we see a messier Brexit then this becomes less relevant.
“So I think right now the Brexit element is having a much greater impact on the pound.
“And with every passing week, it seems the possibility of a no deal scenario becomes lessened, a softer Brexit or a second referendum becomes increased.”
Sterling has remained sensitive to Brexit updates, with foreign exchange analysts predicting markets will be remaining focused on how Britain will leave the European Union.
The pound enjoyed a boost yesterday, smashing through the €1.140-barrier against the euro, after the release of better-than-expected unemployment and pay figures.
Figures from the Office of National Statistics (ONS) showed there are record numbers of people in work in the UK, while average earnings increased by 3.4 percent in the year to November, the highest for a decade.
However, analysts are warning there could be more volatility in store for sterling as Brexit movements continue to dominate headlines and exchange rate movement.
Tyler Griffin, a currency specialist at OFX, said: “Investors are still focused on how Theresa May will negotiate with the EU over the next few days.
“Looking ahead, if several ministers resign in response to being banned from a vote to stop a no deal Brexit, as Amber Rudd has suggested, we expect further pressure on the pound.”
Currently, versus the US dollar, the pound is worth $1.3068 according to Bloomberg.