Matthew Vassallo
Senior Executive Dealer
GBP Forecast – Is the Pound’s Recent Upturn Sustainable?
Progress with Brexit talks has helped Sterling sustain its recent gains but will events in Syria have any negative impact on its value?
With the media focus moving away from Brexit talks over recent weeks, it has enabled the Pound to sustain its recent improvement against the majority of the major currencies. This report looks at what's coming up for GBP exchange rates.
In the table below you’ll find high to low exchange rate movement for GBP/EUR, GBP/USD and GBP/CAD and the dfference when exchanging £200,000 during the last month:
| Currency Pair | % Change | Difference on £200,000 | |
|---|---|---|---|
 GBP |  EUR | 2.2% | €5,000 EUR |
| GBP |  USD | 3% | $8,740 USD |
| GBP |  CAD | 2.5% | $9,280 CAD |
Those clients with any upcoming Sterling currency exchange to execute will have been buoyed by the Pound’s recent surge against the Euro, US Dollar and Canadian Dollar.
Although all three have found a level of support around the current thresholds, there is no doubt in my mind that this is the first time in recent memory, that the Pound has been able to make gains and sustain them to the extent we are currently witnessing.
With deep concerns regarding the grave situations in Syria and an increasingly strained relationship with Russia, the media’s focus was yesterday centred on Theresa May’s second day in the House of Commons. An emergency debate was called where MP’s were considering Parliament's role in approving military action in Syria, after the PM authorised airstrikes without consulting them.
This is the first time in recent memory, that the Pound has been able to make gains and sustain them to the extent we are currently witnessing.
The longer-term implications of this decision are yet to be understood and I do believe any further interventions by the UK could indeed put a strain on the Pound, as investors may shy away from what is perceived to be a potentially destabilising situation for the UK economy.
Of course, there is no exact science as to how investors will react to any such situation but it is certainly a concern on many levels and as such, it may be worth considering taking advantage of the recent improvement and avoiding any risk in the long-term.
Wage growth rises above inflation
Whilst the commons debate was taking centre stage with the media, investors were closely monitoring the UK’s employment data.
The big news yesterday was that wages have risen above the rate of inflation for the first time in a year. This is potentially significant news as it’s likely to lead to further calls for an interest rate hike, when the Bank of England (BoE) meet for their next policy meeting.
The UK official Unemployment Rate also fell to 4.2% from 4.3%, which is likely to add to the feel good factor around the UK economy at present.
Despite these positive figures the Pound did not react during morning trading, with the EUR finding plenty of support around 1.16 and the greenback holding firm below 1.44. Whilst these thresholds may well be tested again over the coming days, it does seem as though much of this positive feeling has now been factored into Sterling’s current value.
Those clients with Sterling currency exchanges to make need to ask themselves do they have the risk appetite to hold on for further gains, when there are still many unanswered questions in terms of the UK longer-term economic well-being?
Whilst the Pound has clearly gained a foothold I am unmoved in my opinion that the risks still outweigh the upside gains and any negative report regarding Brexit could set the wheels in motion for another decline.
When you look at how fragile investor confidence has been over recent months, it wouldn’t take much to knock this in my opinion and whilst it is unlikely the Pound will dip back to the lows of 2017, I still feel any aggressive upturn from its current levels is unlikely to be supported under the current conditions.
Of course an interest rate hike or further progress with trade talks could assist another spike but after months of false dawns and relative disappointments, my risk appetite remains minimal.
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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