This Pound Sterling update looks at the currency pressure on Sterling's value and examines factors that could affect GBP exchange rates this week. The table below shows the market movements for a number of currency pairings in the last 7 days:
Unfortunately, those holding Pound Sterling are very much at the hands of the markets at the moment and if we learnt anything last week, it’s that investors seem to be gradually losing faith in the Pound as Sterling dropped by almost 2.7% and 0.9% against the Euro and the Dollar respectively.
With seemingly higher and safer returns promised by the US Dollar and the Euro, as their respective central banks seem to be running out of reasons not to drive their monetary policy.
It is understandable that the Pound is losing value by the day: would you invest your money into a UK anchored by Brexit driven inflationary pressures and riddled with signs of 2008 sub-prime like consumer debt?
Multi-nationals are already instigating precautionary measures. Last week US Bank Morgan Stanley confirmed it has chosen Frankfurt as it’s European base post Brexit whilst major UK drug manufacturers have begun to stockpile their products in strategic warehouses across Europe in a bid to remain competitive.
There does seem to be some reason for optimism however. The Pound is still held to ransom by the ongoing Brexit negotiations and it is no secret how much the markets value political stability when going into these talks. It wasn’t for nothing Sterling fell by nearly 2% against the EUR following the shock general election result, equating to a near €4,000 loss on a £200,000 transfer. As such I expect the markets to respond positively when there are signs of unity and belief from PM May’s cabinet.
Yesterday, Transport minister Chris Grayling backed May to keep her job until 2020 and beyond, stating the support she holds from the Conservative party is unquestionable, whilst the UK’s environment secretary Michael Gove soothed investor fears of a disruptive Brexit by suggesting the Cabinet remains entirely unified with regards to the proposed 24-month transition period.
The Pound is going to need a consistent stream of positive political feedback just like this if it is ever going to re-establish itself on the international stage. If you are looking to purchase foreign currency with Sterling in the near future it may be worth looking out for quick spikes in the market rather than hoping to benefit from sustained growth from the Pound.
Wednesday’s GDP release and inflationary report will be this week’s key market movers for Sterling, although I wouldn’t bank on them making your transfers any cheaper, with both expected to bring further pressure to the Pound.
As such, It may be worth contacting your account manager who can help you protect your returns in case the Pound drops further in the later stages of the week.
For more information on how future data releases could affect your transfer call our currency brokers on 01494 725 353.
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