With the current uncertainty surrounding the UK having a negative effect on the Pound, this update discusses some of the issues and looks at factors that could affect GBP exchange rates this week. This table displays the movements for a number of GBP currency pairs during the last month:

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Sterling under pressure but for how long? – Brexit negotiations and political stability key for a Sterling recovery

The UK economy finds itself in a unique and difficult position at present. Many of us including myself are concerned about the direction our country is taking under a fragmented government, trying to negotiate our separation from the EU.

Regardless of your political alliance, or whether you voted Remain or Leave, the current uncertainty that surrounds us is clearly having a negative effect on our economy. The market perception is handicapping Sterling, with the Pound struggling to make any sustained inroads against most of the major currencies, including the EUR, USD and AUD.

My clients are currently questioning when they should be executing their currency exchanges and whether or not we are likely to see a recovery for Sterling over the coming weeks? As I’ve advocated for some time the current market uncertainty means that client should be looking to towards short-term opportunities and not gamble on a sustained improvement.

Looking at the recent trend and it was yet another unsteady week for Sterling, with heavy losses followed by a slight recovery heading into the weekend. Much of the focus was on whether the Queen's Speech would be passed through Parliament and Theresa May was able to breath a huge sigh of relief, as it was passed by 323 votes to 309.

However, this small majority of just 14 votes indicates how close it was to not being approved and if that had occurred surely it would have been the end of Theresa May’s tenure as Prime Minister?

Whether she is able to survive the coming months is being debated fiercely amongst economists and much will depend on her ability to get the best out the deal with the controversial Northern Irish DUP party.

Sterling’s value has deteriorated in line with the political and economic uncertainty created by the election result and a difficult start to Brexit negotiations and despite Bank of England (BoE) governor Mark Carney helping to alleviate some pressure with talk of a prospective interest rate hike, is that really going to be enough to drive Sterling’s value up again this week?

UK economic data for the week ahead

Looking ahead and it’s a busy week for UK economic data releases. Any clients with a Sterling currency exchange to make should be keeping a close eye on today’s Manufacturing PMI data. Last month’s figure of 56.7 was well received by the markets, anything below this is likely to put further pressure on Sterling.

On Tuesday we have PMI Construction data, always a key barometer for investors, along with the latest Inflation Report Hearings. These will be monitored closely due to the UK’s rising inflation levels and any further predicted rises could halt Sterling’s mini recovery.

Wednesday sees the release of the final set of PMI data for the week, with clients holding the pound hoping Services figures come in above 53.8 from last month.

However, it could be Thursday that holds the key, with the latest NIESR GDP estimate. This well-respected think tank has influence on investor confidence and any positive or negative outlook is likely to have an instant impact on Sterling’s value.

Finally, on Friday we have a host of Manufacturing & Industrial production figures, alongside our latest trade balance figures. Any increase in our trade deficit is unlikely to boost Sterling’s levels as we head into the weekend.

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

 

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.