The Brexit bill will find its way through the House of Lords next week. It has been suggested the bill could face amendments that may derail Theresa May’s deadline for Article 50. The below table shows the difference between the high and low point for GBP/EUR, GBP/USD and GBP/ZAR exchange rates during yesterday’s trading session.
|Currency Pair||% Change||Difference on £200,000|
Amendments to exit bill could cause a delay in the triggering of Article 50
The very brief exit plan from Theresa May has now been passed by the House of Commons and has now been handed to the House of Lords.
Although, personally I feel there will not be any significant resistance it is important to keep in mind if there are any delays in the invocation of Article 50 the pound could suffer as a result.
I would expect how often the PM is required to keep parliament updated on the progress in trade negotiations to be a key topic along with parliament being given the opportunity to vote on the final bill. I would also anticipate the situation of current EU citizen’s residing in the UK rights to be brought up.
The bill will commence going through the House of Lords on Monday 20th February after parliament reconvenes from recess.
If a vote is passed to amend the bill it will be returned to the House of Commons for approval. It could be the case that we see the bill moving back and forth between the two. This could well prove detrimental to Sterling.
My view is that Sterling will rally once trade negotiations become more apparent. Until then I expect Sterling’s value will be very difficult to predict against most majors. If you need to perform a trade during this time frame, it is crucial to be in touch with an experienced broker to assist in timing your trade and picking the correct contract option to suit your needs.
The volatility on GBP/EUR was demonstrated yesterday after European Central Bank member, Ewald Nowotny aired his concerns on trade negotiations. He stated there could be chaos if the two year exit target is not reached. Sterling fell by close to a cent against the Euro following the comments.
Keep an eye on UK Inflation
UK inflation data was released this week and came in lower than expected. This is worrying as many economists are predicting a sharp rise due to the weaker pound and it seems this has yet to materialise. With imports now considerably more expensive it could be only a matter of time before price increases filter through to consumers. Let us hope there is not a sudden rise as wages will certainly not be able to keep up which could mean trouble for the UK economy.
Retail sales data could change Sterling levels
This morning will see the release of retail sales figures for January. There is expected to be a rise across the board, but it will be interesting to see if the Brexit situation is effecting the consumer. If the results are not as positive as expected we could see the pound lose value.
A delay to the government’s Brexit deadline may stir market uncertainty in the short term. Clients who have a foreign currency requirement may benefit from getting in touch with their assigned broker today on 01494 725 353 or by emailing me here.