It was only 10 days ago that Theresa May agreed a ‘soft Brexit’ with her cabinet of minsters at the Chequers residence. The Sterling report below goes into further detail about the way this could impact the Pound in the coming weeks. The table below shows the range of exchange rates between the Pound and a number of currencies throughout the past month, demonstrating the importance of timing your transfer well.

Currency Pair% ChangeDifference on £200,000
GBPEUR1.84%€4,212
GBPUSD2.8%$7,546
GBPAUD2.39%CAD $8,466
Sterling slump provides opportunity for Euro sellers

Although the Pound initially reacted positively against the Euro, this spike was short-lived as David Davis and Boris Johnson both resigned within 24 hours, which caused GBPEUR to lose a cent in under three hours of trading. Fortunately for the Pound, rumours that we could see one further resignation per day have not materialized so far, however, these events could lead to a variety of scenarios which would put pressure on Sterling…

For example, could Johnson be mounting a leadership challenge and cause a general election whilst the UK is negotiating Brexit? In case of a leadership challenge, could Jeremy Corbyn be – as reported by bookmakers - the next Prime Minister? Would a no Brexit or a soft Brexit see Nigel Farage return to politics? Any hint of these events occurring will have a negative impact on Sterling.

The white paper published last Thursday suggested UK-EU relations would be more interlinked than expected, although the document failed to detail how professional services – which account for 80% of the UK’s GDP - will work moving forward.

US-UK Trade Deal Possible

Donald Trump’s visit to the UK has matched its expectations of controversy. Trump stated that a trade deal with the UK will absolutely be possible and that whatever the UK does after it leaves the EU is “ok”. These comments came hours after he told The Sun newspaper Theresa May’s Brexit plan could kill such an agreement.

Perhaps the main points to come out of this working visit were symbolic rather than concrete: a large balloon portraying President Trump as a baby, countless protests in London and signs criticising Trump’s attitude to women whilst he was with the Queen, praising Boris Johnson but not realising how this undermines the government in power of the USA’s oldest ally…

Next move - Michel Barnier

The ball is now in the EU’s court. How the 27 nations respond will determine how Brexit develops. If they reject May’s proposal, we would be back to square one, and, in this scenario, the Pound should lose value. It is difficult to think that the UK government would have time to come up with another realistic proposal after it took them so long to propose this one.

In any case, EU chief negotiator Michel Barnier’s next remarks will be key to see how negotiations could advance and Sterling will fluctuate depending on how markets interpret them.

How likely is a deal at present?

Brexit & Economic Data this week

The main factor influencing Sterling rates in the coming months will be Brexit. The Customs and Trade bills are due for stage consideration debate today and tomorrow are set to move the markets, as well as Wednesday’s general EU-debate. This week’s economic releases also have the potential to move the Pound’s value. If you are buying foreign currency and selling Sterling today, focus on Average earnings release at 08:30 is expected to stay constant above 2.5%. Also, keep an eye on Tuesday’s average earnings and unemployment data but also Wednesday’s retail and inflation releases. If these are positive, Sterling’s value should strengthen and the possibility of an interest rate hike in August as opposed on November will increase.

In any case, last week’s resignations and subsequent fluctuations highlight the importance of hedging your risk against market uncertainty. A forward contract can help you do this – to find out how, give us a call on 01494 725 353 or email me here.

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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.