Sterling exchange rates look set for an interesting second half to September with Governor of the Bank of England Mark Carney’s comments at the end of last week sowing the seeds for further volatility. Carney initially provided the market’s with reason for optimism by telling May’s Cabinet they could expect a considerable economic rebound worth up to £16bn if she can convince EU members to loosen their parameters and adhere to the principles laid out in her Chequers plan. More on the potential impact of these comments on the upcoming Brexit discussions this week in the Sterling report below, with the table showing the range of exchange rates for a number of currency pairings during the past week.
|Currency Pair||% Change||Difference on £200,000|
I do worry however that by showing just how much the UK needs a deal from the EU, Carney may have weakened the PM’s hand as she flies to Salzburg this week for pivotal talks. May might be left in a very precarious situation if she leaves Austria without any sign of compromise from the EU.
Carney alluded to a potential drop of 35% in uk house prices if no deal is reached. With the autumn deadline fast approaching, if May fails to make progress it would be very difficult to imagine her getting much backing from the UK public if her leadership comes into question.
Shadow Brexit secretary, Emily Thornberry suggested Labour will almost certainly vote against any kind of Brexit deal as it stands, as it is nearly impossible the Tories will be able to agree on acceptable terms in time. If a proposed deal is rejected, Mrs Thornberry believes they would need as little as 10 Tory MPs more to move against the PM for another general election to be called.
Furthermore, Environment Secretary Gove showed his support for the Chequers plan for the time being, but by pointing out that the Government could alter it’s relationship with the EU once a new PM is in place, Gove only highlighted the divide within the Government further.
For this reason, I see very little reason for Foreign Currency to become any cheaper in the early stages this week, with investors likely to tread carefully before backing the Pound anymore.
Those with a short-term requirement may want to consider their positions and capitalise on the Pound’s recent rise over the last 3 weeks, just in case May returns empty handed and Sterling’s fortunes are reversed. Wednesday’s key inflation and retail sales releases will likely be the next major market movers. Getting a game plan together ahead of these releases could enable you maximise your returns.
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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