The main driver of Sterling’s weakness of late has been the political turmoil in the UK. The Sterling report below discusses the ongoing impact of uncertainty on Sterling. The table below shows the range of exchange rates for a number of currencies against the Pound throughout trading hours yesterday.
|Currency Pair||% Change||Difference on £200,000|
Prime Minister Theresa May is currently ‘clinging to power’ according to reports. On Monday, it emerged that she had survived two votes on the customs bill and faced backlashes from pro-Brexit members of her own cabinet after they felt she caved into demands.
The political pressure is not about to let off as Parliament yesterday debated on trade and how this should look after the UK leave the EU. Theresa May managed to survive a bold bid from Tory rebels yesterday to create a customs union with the EU if the trade deal failed. Conservative MP’s were warned yesterday that if amendments to the trade bill were voted for, this could have led to a vote of no confidence for the PM and potentially an early general election.
The main talking point today will be The Prime Ministers questions, were she is likely to face a grilling from other MP’s, the last chance to do so before the parliament breaks for the summer recess.
With so much currently going on with UK politics at present, I would suggest speaking to your well-informed broker before making any decisions on trading.
The Pound saw some wild swings in the market yesterday, in what was a busy day both politically and data wise in the UK.
The UK labor market posted some healthy data yesterday however despite this, the Pound still failed to make any significant gains. The UK unemployment rate held steady at a record low of 4.2% from the three months up to the end of May.
Overall, the data yesterday meant that employment was at records highs, with the employment rate hitting 75.7%. However, the strong employment numbers weren’t accompanied by strong wage growth which actually slipped to a six-month low despite record employment. This combined with the political uncertainty yesterday is why Pound lost ground against the majors in yesterday’s trading.
Whilst a rate hike in the UK is largely nailed on in August’s meeting, analysts have commented that there would need to be a much larger increase in wage growth activity to support an aggressive path of rate hikes that would ultimately see sterling surge. This combined with the political cloud of uncertainty means that it’s difficult to see where Sterling strength is going to emerge from in my opinion over the next few days. If you are buying currency with Sterling it may benefit to keep this in mind if you have an imminent requirement.
Bank of England Governor Mark Carney’s comments yesterday did little to help Sterling’s wobble as he addressed lawmakers at a parliamentary hearing in Farnborough. In essence, his approach was that a ‘no deal’ Brexit scenario would have major economic consequences for the UK economy, and would mean the Bank of England’s Monetary Policy Committee would have to rethink raising interest rates if this were the case.
I personally think that these comments were the main reason behind Sterling’s slip during yesterday afternoon’s trading and highlight just how volatile the markets are at present.
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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