Despite a torrid run for Sterling of late, it has managed to claw back some ground against some of the other major currencies early this week. The Sterling report below discusses the external and internal factors impacting the Pound currently, with the below table showing the range of exchange rates during the past month displayin the difference in a number of currencies you could have achieved when selling £200,000.00.
|Currency Pair||% Change||Difference on £200,000|
GBP/EUR rates spiked back above 1.12 during yesterday’s trading, whilst gains were also seen against the AUD & NZD. Whilst no inroads were made against the USD, the Pound at least managed to curb any further significant losses, with the pair trading above 1.31 by close of European trading. Whilst I am not overly confident that this positive run will continue at any great pace, it seems as though the comments made by EU Commissioner Michel Barnier, helped steady the ship and secure the Pound value around its current levels. His comments related to an acknowledgement that a solution could be found regarding the UK’s relationship with the Custom’s Union post Brexit, along with a resolution to the Irish border, two of the key issues taking place in the UK/EUR negotiations.
Whilst his comments may be seen as something of a silver lining, I believe without these the Pound’ losses would have been even greater.
There is no hiding from the fact that investors seem to have completely shied away from the Pound in recent weeks, as the UK’s political crisis deepens. UK Prime Minister Theresa May came out fighting as usual, claiming it was time “to get on” with reaching a Brexit deal. However, despite her upbeat tone, it is clear that she is struggling to unite even her own party.
Her current Brexit plan is under increasing scrutiny, with some MP’s evening taking the stance that a no Brexit deal is better than the one the government is trying to achieve.
It seems as though she is fighting a losing battle, although it is unlikely her leadership will be challenged for the time being, as I do not believe that any of the front-runners for number 10 would want their name attached to the current fiasco.
The Pound itself may struggle to sustain any improvement against the Euro or USD over the coming days. Whilst it is having slightly more luck against the commodity-based currencies such as the AUD, NZD & CAD, this has more to do with the uncertainty surrounding President Trump’s current trade tariffs and the subsequent slowdown in global growth.
In truth, investors have been selling-off their GBP currency positons since the much-publicised resignations of key government figures Boris Johnson & David Davis. Add to this a poor run of economic data, which in turn has significantly lessened the chance of an interest rate hike next month. These factors, along with the on-going uncertainty surrounding Brexit, mean that it is hard to make a case for a sharp upturn in the Pound’s value anytime soon.
Personally, I would be keen to protect any short-term GBP currency positions, as the downside risk for those clients holding Pounds certainty seems to be outweighing any upside return.
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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