Sterling exchange rates have remained fairly range bound this week as the markets prepare for the next wave of Brexit rumours and debates to take centre stage and drive investor sentiment. The table below shows the market movements for a number of GBP currency pairs during the last 10 days:
|Currency Pair||% Change||Difference on £200,000|
The question as to whether or not the UK should remain within the EU Customs Union has been earmarked for a long time as a real stumbling block for Theresa May and her Cabinet. Today, that debate resumes and not in the best circumstances it has to be said.
Yesterday evening PM May was dealt a blow as the upper house of Parliament voted in favour of changing a law that would have permitted her team to call on “wide ranging powers” to amend laws when deemed “appropriate” without consulting Parliament.
The loss means yet another obstacle in the race against the time to reach a trade agreement with the EU before the March 2019 deadline. As it stands any amendment to the Brexit bill will have to be passed through the House of Commons as well as the House of Lords, where the time consuming cycle of “to keep” or “to overturn” will likely undermine PM May’s progress over the coming months. Although the vote can still be overturned, it still highlights the divisive environment the PM will be walking into today, and indeed the cloud of uncertainty that soon could loom once more over sterling exchange rates.
Personally, I see Sterling at a bit of cross roads at present with it’s value very much hinging on PM May convincing the markets that she has all the answers.
Just how Theresa May responds to EU diplomats offering a more bespoke trade deal if the UK remains in the custom union for example could well be a tipping point. Although it would likely please leading figureheads of London’s financial sector, its an offer that goes against May’s principles of severing ties in order to negotiate new terms freely worldwide.
Furthermore, the markets will also be watching as to how May responds to the affirmation by the National Audit Office that the UK will be forced to pay the Brexit divorce bill whether it reaches a trade agreement with the EU or not. Something that has been repeatedly denied by both May and Brexit secretary David Davis in recent weeks.
With so much going against the Pound both politically and economically since the bank of England governor Mark Carney downplayed the likelihood of an interest rate hike next month I feel it more likely the Pound will fall marginally in the short term. If you are looking to buy foreign currency with Sterling it may pay to act before these Brexit talks begin to take hold once more.
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