January started with the pound and the FTSE 100 strengthening on the back of higher-than-expected growth in GDP. The pound surged past its previous post Brexit-vote high to peak at over £1.42 to the dollar. Although this was partially due to dollar weakness, it made ground against the euro too, prompting commentators to speculate that the UK’s better-than-expected performance in the run-up to Brexit was restoring consumer confidence.
There was a suggestion by some analysts that the FTSE’s downturn at the end of the month could be explained by the leaking by Buzzfeed of a Whitehall paper that suggested depressed economic growth following British exit from the European Union. However, markets globally have seen a similar downturn, and sterling’s continuing strength might actually be a sign of underlying strength in the face of this global drop-off.