Pound remains under pressure as Brexit bites

Sterling rates of exchange have continued to be under pressure recently and have hit near record lows against both the USD and the EUR. These falls have really been from the UK whom economic situation has been weakening plus concerns over the future continues to weigh on the Pound’s value. This week we had the 10th anniversary of the financial crisis and the start of ultra-low interest rates which are still very much in place. The last time there was a rise in rates was now over 120 months ago.

The table below shows the market movements for a number of GBP currency pairings in the last 30 days. You can keep track of live interbank exchange rates here.

Currency Pair% ChangeDifference on £200,000
GBP/EUR3.95%€8,750
GBP/USD3.35%$8,500
GBP/CHF4.75%CHF 11,650

Economic data recently has shown a fall in the Pound’s performance and the messages around ‘putting off investment’ into UK plc continues as the Brexit talks are on hold for the political August break.

Pound's fall from graceLast week manufacturing activity in the UK actually saw growth and grew at a faster than expected rate in July, this would have been driven by international demand as the Brexit impact on the Pound makes the UK exports more attractive. Saying that however with external factors on inflation softening the likelihood of an interest rate hike in the UK has fallen significantly for 2017.

The NIESR now thinks that it will happen in 2018 but how much of an impact on the Pound’s value it will have is debatable.

What is worth remembering is that the Bank of England cut rates after the Brexit vote last year so any climb would be marginal to pre-Brexit vote levels.

Moody’s raise further concerns about the UK

Other warning shots for the UK came recently from the rating agency Moody’s, they cut its outlook on UK consumer debt and warned that higher inflation, weak wage growth and rising indebtedness leaves lower income earners very much exposed. Simply put, when inflation is greater than growth forecasts there will be a problem and this is not expected to change any time soon.

The Bank of England also released recently that it expects investment in the UK economy to be 20 percentage lower in 2020 than it had forecast before the Brexit vote.

I generally see the Pound remaining under pressure against both the Euro and the USD moving forward. With Brexit talks starting again soon, government returning to Westminster, and the economy looking the way it does I would suggest anyone with Pounds to sell to take a more protective strategy. If we see any movement up I would very much see it as a short term opportunity rather than a long term trend.

Economic data to only help GBP buyers expected

UK Consumer Price Index and Retail data is released on Tuesday and is expected to be the busiest day for the Pound next week. I don’t expect these to give any GBP sellers better levels so would move before this event. GBP buyers may want to take a longer term position with the hope of better levels still.

For learn more about upcoming data releases that could impact currency values call our team of currency brokers on 01494 725 353. Alternatively, you can email me directly at hse@currencies.co.uk.