In this report Dayle Littlejohn looks at whether the Prime Minister is aiming for a softer Brexit, and also what is ahead for Sterling exchange rates in the coming days. The table here shows the market movements for a number of currency pairings in the last 30 days:

Currency Pair% ChangeDifference on £200,000
GBPAUD3.5%AUD $12,200
Theresa May eases concerns of Article 50 extension

Is the Prime Minister aiming for a softer Brexit?

In recent weeks the UK and EU have been negotiating the transitional period. The negotiations have been tough and are on-going, however this week we have had key developments, which I think indicates which way sterling is heading in the upcoming months.

Yesterday evening UK Prime Minister Theresa May held emergency talks with senior ministers at Chequers, the Prime Ministers countryside retreat. The 11 MPs debated Brexit once more and by all accounts have formed a plan moving forward. The talks would have been challenging but the reports coming from the meeting are positive. One MP told the press that the Prime Minister has ‘played a blinder’.

My personal opinion is that the message delivered by the PM is that hard-line Brexiteers such as Boris Johnson need to start preparing for a softer Brexit.

The future of the pound once the transitional talks are over

The UK published proposals earlier in the week that suggested the UK will abide by new EU laws which are made within the transitional period, the UK will continue with the free moment of people and finally the UK will only sign new trade deals with permission for the European council. There are still a few topics that need to be ironed out as the European Commission stated yesterday evening just before the Chequers meeting that the approach the UK plan to take at present, doesn’t fit into the EU guidelines and the UK cannot cherry pick rules to stick to once Brexit is over, in other words there would be no deal if the UKs offer doesn’t change.

Nevertheless, the approach by Mrs May and David Davis suggests to me that there has been an agreement between the 11 MPs and as long as Mrs May gets it through the whole cabinet next Tuesday, she will give a speech later in the week outlining the position of the UK, which should provide clarity for the markets. I wouldn’t be surprised to see the UK give in to further demands set out by the Europeans.

With all the information that we are receiving I still expect to see highs and lows for the pound until the transitional talks are over and confirmed. Nevertheless, I expect the UK and EU to come to an agreement and therefore my forecast for the upcoming months is overtime sterling to strengthen. For anyone involved with the pound, next week could be crucial and I would recommend getting in touch with your account manager today to outline your position.

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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