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

Currency Pair% ChangeDifference on £200,000
GBP/EUR0.75%€1700
GBP/USD0.67%$1800
GBP/AUD0.77%AUD $2660

Sterling set to struggle due to Brexit Negotiations

Phase two of Brexit talks are not going to be easy, with both Brussels and the UK at loggerheads before the talks have even begun.

Phase 2 Brexit talks could mean trouble for the PoundThe first round of talks hardly ran smoothly and Sterling suffered as a result. If we look at GBP/EUR for example, it has been range bound between 1.12 – 1.15. Be wary of having the thought that 1.15 will reached short term again. GBP/EUR hit 1.15 for a very small window following the announcement of the Irish border deal. The fragility of the pound was displayed when David Davis stated that the deal was not legally binding and the pound fell as a result.

The next stage of talks is set to address transitional arrangements after the UK leaves. It will also cover security and economic co-operation. Trade talks will be crucial, possibly the most important subject of the entire Brexit process. Brexit Secretary, David Davis has stated he will not allow Brussel’s to cherry pick terms and also accused EU agencies of being discriminatory for urging UK business to leave Britain.

Phase 2 talks will begin towards the end of the month, no firm date has been given.
With this in mind, it is vital to be in touch with your broker, so if a window of opportunity does arise you are notified quickly and will be in a position to take advantage of the rates. I would recommend putting a rate alert with your broker so they know your targets.

CPI data could cause movement on the exchange

The next data release of importance is Consumer Price Index figures (CPI). CPI is released on Tuesday next week, it is a measure of inflation and does have the power to influence Sterling value. Inflation is particularly key to the UK economy as we have seen rapid rises due to the weak value of the pound causing imports to become more expensive. This is eventually passed on to the consumer, and if average wage growth is not keeping up with inflation alarm bells are ringing.

For more information on how future data releases could affect your currency transfer call our trading floor on 01494 725 353 or email me here.