Following Michael Gove’s elimination from the Tory leadership contest with 75 votes, the competition has been whittled down to the final two of Boris Johnson and Foreign Secretary Jeremy Hunt, who narrowly beat Gove by just 2 votes. With Boris receiving a significant 160 votes, it appears that he is a racing certainty to win and therefore become Prime Minister in the week commencing 22 July.

Currency Pair% Change (Month)Difference on £200,000
GBPEUR2.00%€4,460
GBPUSD2.13%$5,340
GBPNZD1.81%NZD $6,940

In the run up to the July leadership decision, the next PM will be decided by the 160,000 Conservative members, a group bolstered by an increase of 36,000 members from the preceding year.   

There has been speculation that due to Johnson having been a leave campaigner from the outset, many people believe that he would be the suitable candidate for job as he reiterated his plans to leave the EU with or without a deal during a hustings event in Birmingham on Saturday. Johnson goes on to describe the possibility of the UK leaving the EU by the deadline as “eminently feasible” in a bid to defuse some of the tension in the growing consensus that the UK may be forced to leave the EU without a deal or delay the process yet further.

Since the currency markets strengthen during times of certainty, Johnson becoming PM may offer some short-term stability in the pound. Sterling rates have been weakening since hitting an interbank peak of 1.175 against the euro on 5th May to its current interbank levels sitting on the 1.117 mark, which included a reduction of a third of a cent in last week alone. However, with the Brexit deadline looming ever closer, it is possible that the pound may see a further reduction in strength. Realistically, unless a deal is negotiated and agreed before the 31st October, GBP exchange rates could continue to remain under pressure in the midst of all the political uncertainty that is associated with a no deal Brexit.

As a result, clients holding sterling may wish to get in touch with their account manager here at FCD to keep abreast of the latest market updates.

Eurozone inflation statistics to be closely watched

UK Inflation set to remain steady

Today, the UK Inflation Report Hearing will be released following discussions with Mark Carney, the Governor of the Bank of England, associated officials and the Parliamentary Treasury Committee.

It is expected that inflation figures will remain the same at 2.0% following the Consumer Price Index (CPI) measure which found that inflation increased by 2.0% year-on-year (YoY) in May 2019 which was down from 2.1% YoY in April 2018, according to reports from the Office for National Statistics. Since this 2.0% figure was the originally agreed target for current inflations levels and what the markets had been predicting, there is expected to be a minimal amount of movement for sterling rates following this report release.

However, historically inflation releases can cause some volatility in the currency market. Therefore, clients may wish to get in touch with us on 01494 725 353 to discuss contract options such as limit orders and forward contracts.

UK GDP slowdown forecast

The biggest UK data release will be the UK Gross Domestic Product (GDP) for Quarter 1 which will be published at 08:30 on Friday morning. The Bank of England (BoE) has already reviewed its GDP forecast of 0.2% and has now cut it to 0% following further political uncertainty around Brexit.

The review in itself could make sterling exchange rates volatile. Clients with a who are considering exchanging currency in the near future may want to get in contact with us on Friday when this data is published.

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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.