Last week we saw the Pound fall in value and reach new lows against both the USD and the EURO. The resistance level - that being the bottom level reached, within the last 9 weeks of 1.135 for GBPEUR was broken and reached as low as 1.1220. Against the USD the Pound reached a low of 1.31, retesting its lowest level that we have not seen broken since November 2017. The Sterlng report below looks into the ongoing reasoning for this, and the table below shows the range of exchange rates throughout the past month demonstrating the difference you could have achieved when buying £200,000.00 during the high and low points.
|Currency Pair||% Change||Difference on £200,000|
On Friday the UK government left Chequers with a decision on what it wants from its future agreement with the EU after Brexit. This includes an agreement on the Irish border, an area that has been a sticking point since March, along with agreements on future trade, services and law. The news had very little impact on the value of the Pound as it is not yet the final deal on Brexit, far from it, this was simply an agreement within the UK on what they want to achieve; negotiations with Brussels are far from concluded and as a result what UK plc could look like after 2020 remains unknown.
What the final deal will look like is not expected to be known until the end of October. I for one expect a lot of political uncertainty to come before that date as history has taught us political negotiations don't often conclude early. It would not surprise me if Brexit negotiations get worse before they get better which in turn will weigh on the Pound and push its value against other currencies lower. How challenging it is for the Government to get an agreement with Brussels has continued to be highlighted and get more challenging. The Brexit secretary David Davis resigned last night putting another cloud over government. With his insight into the situation he has concluded that no deal is becoming increasingly likely which could push the Pounds value down further. This is something to very much consider if you are moving forward with a property purchase in Europe within the coming 4 months...
UK Data has shown signs of improvement in the last week, production, manufacturing and services figures all showed an expansion. The most relevant was the service sector which accounted for 79.3% of GDP in the UK in 2015; UK service PMI rose to 55.1 in June, the highest seen since October 2017.
However the warning signs have also continued to come. UK consumer borrowing slowed in May to its weakest pace since 2015 and investment in the UK car industry halving in the first six months of the year compared with the same period last year.
Next on the horizon for Sterling is Tuesday with the latest GDP figures forecast update. This is expected to show a slight improvement which could potentially give the Pound a small boost on the day. On Wednesday we also have an update from Mark Carney, the head of the BOE; which is an event to mark if you have any pending transfers to make with the UK Pound.
The other focus for most of the UK is the English football team's progress in the World Cup after going through to the semi-finals for the first time in 28 years on Saturday. The World Cup is expected to provide a boost to sales of electronic goods and alcohol in the UK, according to the latest BOE’s survey.
Generally I expect the Pound's value to remain under pressure as we move into the summer months. Central bank policies and forecasts were updated in June and the next major updates are not until July, meaning the UK's negotiations with Brussels will probably provide the biggest driving factor. Personally I don't expect GBP EURO rates to climb above 1.15 and GBPUSD over 1.35 and think under 1.12 and 1.30 is more likely to come first.
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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