Supreme Court impact on currency

The legal position on the path for the Brexit is hotly contended and one which will have a large impact on the value of the Pound moving forward. The Supreme Court, the most powerful in the land, sat in December in a televised debate on this point and initially suggested that they would report their decision in January. They will be deciding whether Theresa May needs to go to the Government to vote on change or whether she can move forward without their consent. The fundamental difference forms part of the definition on whether the Brexit will be ‘hard’ or ‘soft’.

Hard or Soft Brexit impact on currency

A ‘hard’ Brexit is one with little transparency and indeed there may be a swop of controlled borders for free trade of services and products. This is seen as unattractive for investors as who would invest in UK PLC without knowing what it would look like in the years ahead. A ‘hard Brexit’ is widely expected to be negative for the value of the Pound, whereas a ‘soft Brexit’ with more visibility of negotiations is seen as more positive for investors and would in contrast most likely give the Pound a boost in value.

Supreme Court / Brexit timelines

The Supreme Court decision is the first step on this journey of defining the path for the Brexit. Initially they suggested a decision would be given by the end of January, however working backwards, if Theresa May is to keep her promise of triggering Article 50 by the end of March, and to get everything through government, this decision would be needed by the middle of the month.

The judges involved in this decision are due back to work on the 11th so expect a heightened amount of volatility this week as the market waits for this decision.

Theresa May’s Sky interview suggests borders for trade deal

We had an update from Theresa May over the weekend when she conducted an interview with Sky News in which she suggested that she may end up giving up free trade for control over immigration. This dramatically increased the likelihood of a ‘hard Brexit’ and resulted in the Pound’s value falling during Monday’s trading session. It fell by over 1% and resulted in GBPEUR dropping to a 2-month low.

Retail data to impact Sterling

Outside of the ongoing Brexit negotiations and updates, the value of the Pound will remain driven by economic data that updates the market on the health and well-being of the UK economy.

On Wednesday we have UK Manufacturing figures which are expected to show an improvement, this is materialises this so could assist anyone looking to buy Euros or US Dollars on the day.

UK GDP figures are also released on Wednesday afternoon and are again expected to show an improvement as a result of last week’s comments from the Bank of England that the impact from the referendum vote was not as negative as first feared.

Also watch out for company results this week as we have festive figures from Marks and Spencer’s, Tesco’s and ASOS to name a few; most are expected to show an increase and could also therefore help impact the Pound’s value.

I would however expect the above to be very much over-shadowed by any update from the Supreme Court. On their decision, I expect Sterling to either climb 2 cents or fall by a further 4. As a result be sure to review your situation with your broker to make sure that any risk you open yourself to is managed and calculated.

For Brexit updates or to discuss how future data releases could affect Pound exchange rates please feel free to email me directly at hse@currencies.co.uk.

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