Will Article 50 have a positive or negative impact on Sterling?

Sterling exchange rates have seen a bit of a boost recently with GBP/EUR rates hitting their best level to buy Euros in 2017. However, at the end of last week as it is becoming evident that it is not all plain sailing for the Pound. With Article 50 due to be triggered is less than 5 weeks we are entering into a potentially very volatile period ahead. If we turn the focus back to what happened in June 2016 with the Brexit vote this caused the Pound to plummet against all major currencies with drops of over 9% against both the Euro and the US Dollar overnight.

With this precedent having occurred is there potential for the triggering of Article 50 to do the same?

In my opinion we now know that this will take place so there is clearly an expectation. Therefore, it could be argued that the effect may not be so great and indeed it could even have a positive effect on the value of Sterling as it means we are taking more control of the situation so that negotiations to divorce the European Union can commence. However, it also brings with it 2 years of uncertainty and you can be assured that as most European leaders di not want the UK to leave in the first place they will make it extremely difficult to do so. Therefore, it could also be argued that the uncertainty could cause a big fall in the value of the Pound.

If you’re in the process of buying a property in Europe over the next few weeks in order to avoid any potential risks to the downside it may be worth purchasing a forward contract which allows you to fix an exchange rate for a future date for a small deposit. If you take an example of a 5% movement in the wrong direction this could be as much as £4,500 on a currency transfer of EUR100,000.

RBS to cause headache for UK Economy?

The Royal Bank of Scotland has announced losses of £7bn during 2016 and with the taxpayer owning 72% of the bank ths brings with it a 9th year in a row when the bank has made losses. The bank received a bailout back in 2008 of £45.5bn with losses now as much as £58bn. The chief executive has claimed that it will be making profit by 2018 but that means another problematic year ahead. This ongoing headache is clearly not a welcome one and with the government unlikely to sell its stake until it makes a profit this could still be years away. Clearly this is not good news for Sterling and another reason for Sterling’s recent struggle to hold onto its gains.

Economic data this week to affect Sterling

Tomorrow morning with it brings a Gfk (Growth for Knowledge) Consumer Confidence survey with UK manufacturing data due out on Wednesday morning. With little data due out in the UK as we end the month the focus will remain on what is happening politically and economic data releases from outside of the UK.

To avoid potential falls In Sterlings value when the PM invokes Article 50, get in touch with your dedicated broker to discuss the different contract options available to you. Call 01494 725 353 or email teh@currencies.co.uk if you havent traded with us before and would like to learn more.


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