This Pound Sterling forecast discusses factors that could affect GBP exchange rates this week, looking specifically at today's UK Budget, the latest Brexit news and upcoming economic data. In the table below you’ll see high to low exchange rate movement and the difference when exchanging £200,000 during the last month:

Currency Pair% ChangeDifference on £200,000
GBPEUR3.15%€7,050
GBPUSD2.0%$5,150
GBPCHF2.75%CHF 7,250
Inflation comes out negatively but Retail Sales are positive

UK Budget day to drive markets

Today is Budget day for the UK, with the latest update expected from the Chancellor of the Exchequer Philip Hammond at 12:30. This Autumn Statement is not expected to be ground breaking as a result of the slim majority held by the Government in Westminster, but it will give us information on the plans the Government hold for tax and spending. No major changes are expected with NI and tax but instead a focus on the housing market in the UK to try and attract younger voters.

Most of the topics to be covered have again been leaked over the weekend so I don’t expect any real surprises and indeed any real change to the value of the Pound.

There could well be an undertone of positivity for the UK which could strengthen the Pound. Conversely if another policy is released which is scrapped just as quickly like his last budget when he attempted to raise NI, expect weakness to follow.

Sterling movement on the up?

Sterling rates have been fairly range bound over the last week, however this is expected to change in the coming days with the Budget released today.

Economic data for the UK has been fairly mixed recently. UK inflation remained at its five-year high of 3% in October and UK retail sales fell for the first time since 2013 in the 12 months to October. Yesterday’s budget deficit figures also jumped to a higher level than expected, by £500 million more than last month to £8 billion. There have also been concerns mounting about the UK property market, an area which has been significant for tax revenues in recent years. According to recent Rightmove figures more than one-third of UK home sellers have cut their asking price. UK Mortgage approval figures are released on Friday of this week and are expected to show a contraction in activity.

Tomorrow we have the latest updates on the UK economy with UK GDP figures being released. This is expected to stay stable at 1.5%, however any change from this will have an immediate impact on the value of the Pound. Again, if we were to see any variation from the expectation it seems a lot more likely that a contraction will be seen rather than any surprising gain. Something to consider when reviewing your strategy on trading with the Pound this week.

No room for re-negotiation

Brexit negotiations update

Brexit negotiations, even though in the mainstream media daily, have had little impact on the markets of late as it has simply been speculation. Saying that however, there are a number of key events happening in the coming 2 weeks which could very easily impact the value of the Pound going forward.

Next month, the EU will hold its first summit of Heads of State and Government since July 2015. Its task will be to set a course for the next chapter in the development of the EU and Brexit will no doubt be talked about and indeed any financial ‘black hole’ is expected to be pushed towards the UK and the coming exit bill.

David Davis recently tried to comfort bankers and other professionals by promising a special post-Brexit travel regime to allow them to travel freely across Europe. However concerns continue to mount as Aston Martin has recently warned that it may have to pause manufacturing if there is no deal in place when the UK leaves the EU, with lots of jobs at risk if such an event materialised. We also have seen a recent survey of British entrepreneurs conclude that hundreds of people have rejected tech jobs in the UK due to concerns over future immigration policy.

I personally see one of three events materialising in the coming weeks; moving towards a hard Brexit, a soft Brexit or indeed another delay. Each will certainly impact the value of the Pound and there are arguments that suggest each could push rates up and indeed down. Personally I think there is significantly more risk than reward for anyone holding GBP. By that I mean that rates will probably either move up by a small amount or indeed fall by a much bigger degree. Something to be very aware of when reviewing your strategy and exposure over such an important event. Make sure to contact your personal broker here to discuss how this could impact your financial situation.

For more information on how upcoming events could affect your currency exchange, call our trading floor on 01494 725 353 or email me directly at hse@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.