Matthew Vassallo
Senior Executive Dealer
GBP struggling to make inroads against the major currencies
Political & economic uncertainty handicapping any major advances for the pound.
Request a quoteThe pound has failed to make any substantial inroads against the majority of major currencies over the past month, as the Brexit stranglehold continues to sap investor risk appetite for GBP.
| Currency Pair | % Change (Month) | Difference on £200,000 | |
|---|---|---|---|
 GBP |  EUR | 1.2% | €2,720 |
| GBP |  USD | 1.6% | $4,040 |
| GBP |  CAD | 2.9% | CAD $9,940 |
GBP/EUR interbank rate remain marooned under 1.12, with the pound failing to make any impression above this threshold of late. The GBP/USD interbank rate has also fallen back below 1.26 this week, having threatened to make a move above 1.27 at one stage.
The pound has even seen its value slide against the commodity-based currencies, despite the deep-rooted concerns attached to these currencies’ economies in relation to the growing global trade crisis, a topic we will look at in more detail alter in this report. The proof of this is apparent when we look at GBP/AUD interbank rates, which have fallen below 1.80 and GBP/CAD rates, which have fallen sharply over the past month and are currently trading around 1.65.
Looking at sterling’s trend against the major currencies and it’s clear that investors are shying away from the pound over recent weeks.
Sterling’s value has steadily declined in line with a realisation that the UK is still struggling to make any firm inroads with Brexit. The current Conservative leadership race is adding further uncertainty to proceedings with a lack of clarity and direction possibly causing a sell-off of GBP currency positions.
Is the current negative trend for GBP likely to continue?
The key question for investors now is where we go from here and whilst there is no guarantee that the current negative trend will continue. A turnaround in sterling’s fortunes will likely require a sharp shift in market perception and conditions, in order to help facilitate a sustainable spike for the pound against the aforementioned currencies.
There is hope that once a new Prime Minister is in place, a clearer mandate on Brexit will help remove a level of uncertainly, and thus bring some respite for the pound.
However, whilst there is even the faintest prospect of the UK leaving the EU on the 31st October without a deal, the pound could l be handicapped and unable to break free from its current shackles.
Whilst economic data for the UK data is sparse this week, yesterday’s Markit Services PMI figure made for grim reading. The official figure of 50.2 was below the 51 predicted by the markets and seen last month. Any reading below 50 shows economic contraction, a scenario which would likely be damaging and could potentially put further pressure on the pound. This negative data has led analysts to the conclusion that alongside a dip in the latest Manufacturing & Construction PMI figures, the UK economy has suffered its first quarterly contraction in seven years.
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