Today marks the start of the two day EU summit in Brussels and no surprises the Brexit debate continues. Some economists have argued that this summit has the potential to shape the Brexit negotiations for the remainder of the year as we approach deadline day. This Sterling report looks at the potential impact of the outcomes from the EU summit. The table below shows the range of exchange rates you could have achieved when selling £200,000.00 during the high and low points of the past 30 days.
|Currency Pair||% Change||Difference on £200,000|
For clients that a buying a foreign currency short term, anything could happen, therefore if you are budgeting on current rates, you should ask yourself if this morning is the time to buy upfront?
This week we have received reports that the divide within the Conservative party is bigger than ever. Business Secretary Greg Clarke told the Times CEO summit that his vision is for the softest possible Brexit deal, where the UK retains a form of single market access which would include services and goods. However it was only last week that Liam Fox told the Times that business bosses need to stop complaining and Boris Johnson went one step further and was quoted saying ‘F*** business.’
MPs can continue to squabble but the engine room of the UK, which is UK business, are certainly issuing warnings. The most recent company Airbus, which employs 14,000 people that produce aircraft wings have stated that clarity is needed or the company will be moving elsewhere. That would mean 14,000 jobs would be lost and £1.7bn in tax lost according to last year’s tax figures.
The concern from UK business just shows the importance of the EU summit and I actually believe the final message will be that the UK has not made enough progression and time is running out, which potentially could put pressure on the pound. However, UK Prime Minister Theresa May is already planning ahead, as she has summoned her entire cabinet for next week’s meeting at Chequers on the 6th.
Economists are second guessing that the reason Theresa May has summoned her full cabinet and in some ways side lining her war cabinet, is because she plans to announce a soft Brexit approach and the wider cabinet is less orientated towards a harder Brexit. Furthermore 8 weeks ago the Prime Minister announced that she would release a white paper before the EU summit and clearly that has been delayed. I expect shortly after the chequers meeting the white paper will be released providing clarity, which may give a small boost for the pound if business leaders are happy with the Governments approach.
Whilst the EU summit steals the headlines, Friday at 9.30 the UK will release the latest revised Gross Domestic Product (GDP) numbers for Q1. With the Bank of England once again hinting that an interest rate hike could occur as early as August, the revised GDP numbers need to meet the consensus of 0.1% or above. If a fall occurs big losses for the pound should be expected, as the chances of an interest hike will diminish once more.
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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