This Pound Sterling update examines factors that could affect GBP exchange rates this week. The below table shows the market movements for a number of currency pairings on Friday 16th June:

Currency Pair% ChangeDifference on £200,000
GBP/EUR0.4819%€1100
GBP/USD0.3841%$980
GBP/AUD0.6388%AUD 2140

Brexit Negotiations a key factor in Pound value

Brexit NegotiationsToday will see formal Brexit negotiations commence following preliminary talks between officials in Brussels last week. Brexit negotiations will be a key factor in sterling value for the foreseeable future. The enormity of the talks should not be underestimated. These will be some of the most important talks in over 50 years. Key topics will be the status of EU nationals and Britons who are settled elsewhere in the EU, the price the UK will have to pay to leave and most importantly how trade will continue for the UK after exit.

The negotiations were due to start today, but there had been rumours circulating of a delay due to the general election result and ongoing talks between the Tories and the Democratic Unionist Party (DUP).

Political Limbo gives little chance for any significant Sterling gains

The State Opening of Parliament and Queen’s speech has been delayed until Wednesday. It was due to take place today, but has been delayed by the PM’s ongoing efforts to strike a deal with the DUP.

Corbyn is planning to set out his own ideas for forming his own minority government in an amendment to the Queen’s speech and is hoping to have backing from all other parties in an attempt to oust Theresa May. The Conservatives and the DUP are confident they can agree a partnership that will put them in a position to put their programme through and scupper Corbyn’s plans.

Theresa May also has in house problems with some conservatives calling for her to leave her position. Many were unhappy with her response to the Grenfell Tower incident. She has also been warned that any change from her stance of a hard Brexit could result in a leadership challenge. She has been told she has 10 days to save her leadership.

The UK is currently in political limbo, political uncertainty historically weakens the currency in question. Once the UK has a government in place I would expect to see Sterling strengthen against the majority of major currencies.

Public Sector Net Borrowing could have influence on Sterling

There is little data of consequence from the UK this week, the key market movers will be the Brexit talks and who is appointed into power.

Public sector net borrowing may cause some small movement for Sterling on Wednesday. It captures the new debt held by the UK government. If we see a sizable increase on expectations you could see pound weakness.

Thank you for reading today’s Pound Sterling report, I would greatly appreciate any feedback you have and would take pleasure in replying personally. I am more than happy to assist you with any of your currency requirements. Feel free to e-mail me at dcj@currencies.co.uk.