The Pound continues to battle against the Referendum result, with so much uncertainty ahead, will the Pound find any strong ground?

Will the Pound continue to tumble and can I book my exchange rate in advance?

The Pound suffered a torrid week’s trading following the UK’s Brexit vote, with GBP/EUR hitting its lowest levels since December 2013. The Dollar also benefited from Sterling’s woes, with a drop on cable of over 13% since the result of the referendum was announced. The question many clients are now asking is whether or not this negative trend for Sterling will continue?

In my opinion, I believe that further volatility for the Pound lies ahead in the coming weeks, and as a result, anyone holding Pounds to purchase a foreign currency in the near-term may be wise to book their exchange now to avoid further losses. We offer a number of contract options, such as a forward contract, allowing you to lock in your rate of exchange today up to 18 months in advance and therefore eliminating the risk of further volatility.

The main reason I fear that the Pound could be set for rockier times ahead emanates from Mark Carney’s speech last Friday, in which he vowed the Bank of England were prepared to take “all the necessary steps” to stimulate the economy post-Brexit. Regular readers may remember similar comments from ECB President Mario Draghi in the past, which were quickly followed up with a cut in interest rates and further quantitative easing across the Eurozone.

Will the Bank of England cut interest rates in July?

Carney is set to speak in his Financial Stability report on Tuesday, and I personally believe that he could outline measures to encourage banks to lend in these uncertain times and may also hint at the likelihood of a rate cut in the near future. If we do see any hints towards this tomorrow then I believe we could see further GBP volatility, so make sure to speak with your account manager here before tomorrow morning to put a plan in place that could protect you from any adverse market movement. The Bank of England’s next monetary policy meeting is July the 14th, and I would not be surprised if we see a rate cut introduced or at least pencilled in for their next meeting.

Looking further ahead this week we have the NIESR’s GDP estimate for the 2nd quarter of 2016. With the referendum gathering momentum in those months and business potentially putting off large purchases in this period, we may see a drop in previous estimates which could also see Sterling suffer. There are also trade balance figures for May, and with the Pound weakening in the run up to the referendum compared to previous months to make exports cheaper, we may see a brief respite for Sterling.

Due to the uncertain nature ahead for Sterling, booking a currency exchange may be worth doing sooner rather than later, we can help you today by calling 01494 725 353 or email me at rjh@currencies.co.uk.

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