This Pound Sterling update discusses the latest news around the Brexit negotiations and looks at Ben Broadbent's comments concerning a UK interest rate hike. In the table you can find the market movements for a number of GBP currency pairs in the last week:
|Currency Pair||% Change||Difference on £200,000|
Simon Fraser who until 2015 was the Head of the UK Diplomatic Service has warned that the British negotiations team has got off to a bad start. Fraser suggested the in-house fighting between the Cabinet Office members has undermined the UK’s position, as there doesn’t appear to be a single position. Theresa May’s spokesman suggested that the Government would “strongly disagree” with the comments and that “the last two months have been a constructive start to the negotiations”. There were reports that the UK could offer a €36bn settlement which has previously been predicted to be as high as €100bn. The EU have previously refused to negotiate a trade deal with the UK until the “divorce” bill is paid, so if accepted it could have a positive boost for Sterling.
One of the Bank of England’s Monetary Policy Committee Members Ben Broadbent over the weekend suggested that the UK is better placed for an interest rate hike than previously. In 2008 after the financial crisis inflation rose to over 4% however the bank chose not to act, however moving forwards Broadbent believes the economy could now cope with an interest rate hike should inflation continue to rise.
The Bank's meeting last week showed that 2 of the members voted whilst there was 6 against, so there is still some opinions that will need to be swayed. However with the next inflation release expected next week, if inflation comes out above the 3% level there may not be long to wait.
If you’re looking to make a Euro purchase holding on till next week could be a gamble with rewards. However with the recent movements of the GBP/EUR rate a fall in inflation could see the GBP/EUR rate move below 1.10. To make sure we’re doing the most we can to help you achieve the level you want please contact your account manager on 01494 725353.
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