This Sterling update examines factors that could affect GBP exchange rates this week. The below table shows the market movements for a number of currency pairings in the last month:

Currency Pair% ChangeDifference on £200,000
GBP/EUR1.9%€4344.36
GBP/USD2.15%$5502.71
GBP/CAD2.01%CAD $6791.50

Brexit negotiations begin amid political turmoil within the UK

Last week Brexit negotiations between the UK and the remaining 27 members of the EU began, although I think it’s fair to say the current UK Government isn’t in the position it would have liked to be in as these talks commence.

Sterling exchange rates are now towards the lower ends of their current trends, as the currency has felt the impact of an unsuccessful snap election called by Theresa May. The election failed to give her the majority she needed to carry out her Government's plans without the infighting within Westminster she previously complained of.

As of yet there is still no concrete agreement between May’s Conservative Government and the Democratic Unionist Party (DUP) of Northern Ireland. A sticking point appears to be funding for the DUP, who claim that funding in security and defence over the years has left them in need of additional resources. I expect this issue to have the potential to cause movement for Sterling exchange rates as the final agreement could be either welcomed by financial markets, or used as a reason to sell-off Sterling due to an extortionate cost to the Conservatives.

What other issues have caused Sterling to drop, and could they continue to weigh on Sterling’s value?

Over the past weekend the Telegraph has cited unnamed sources within the Conservative party as saying that they would prefer for Philip Hammond to replace May as caretaker Prime Minister, with Brexit secretary David Davis his second in command.

The unnamed source stated that May has been damaged in recent times after failing to win a majority in this month’s election and after negotiations with the DUP haven’t been going as smoothly as initially hoped.

Add this to the gaining popularity of Labours Jeremy Corbyn and the criticism May has come in for in the wake of the Grenfell fire disaster (with further high rise flats also failing fire safety tests), her popularity does appear to be on the demise. I personally don’t think it helps that she wasn’t voted into power, but regardless of our views there is speculation that May could lose her position by October. I cannot imagine more political upheavals being good for the Pound in these key times of negotiations on multiple fronts.

Brexit secretary, David Davis over the weekend shouldered some of the blame for May’s decision to hold the election so early, and said that he was ‘pretty sure’ he could negotiate a good deal to leave the EU via the use of a transitional agreement for 1-2 years.

Mixed messages from the BoE cause GBP exchange rate swings, and what to look out for this week in terms of UK data

Last week clients looking to sell Sterling were sent a number of mixed signals from key members of the Bank of England, resulting in short term spikes in the Pound’s value. It’s in times like these that keeping in contact with your broker here at FCD can allow you the chance of taking advantage of these short-term opportunities.

Sterling bulls may have been disappointed to hear Mark Carney, the Governor of the Bank of England say he didn’t think that raising interest rates would be right until we know the outcome of Brexit negotiations last week. The Pound dropped in the wake of his comments at the Mansion House speech, with many believing the BoE would continue to be happy overlooking the increasing rate of inflation within the UK.

The following day however, the widely considered conservative member of the BoE, Andy Haldane reversed this view and said that he thinks rates will rise within the UK soon, causing the Pound to jump by over half a percent.

These types of occurrences are rare in my experience, and impossible to second guess which is why our proactive service can be beneficial.

This week the key data out is likely to be Friday’s UK GDP data which is released at 9.30am and expected to show a rise of 2% annually, so expect deviations from this figure to result in market movement, and feel free to get in touch if you wish to plan around this event.

Voting on the Queens speech from last week will also take place throughout the week with the final vote on Thursday, with many billing this as the first real test of the Government’s majority.

For more information on how future data releases could affect your currency transfer call our experienced team on 01494 725 353 or email me directly at jxw@currencies.co.uk.

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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.