At the end of last week there was real optimism that this would be the week where we saw a major breakthrough on Brexit with a potential resolve on the backstop. Yesterday morning the UK Attorney General Geoffrey Cox was over in Brussels hoping to achieve a resolve.
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Unfortunately however at around 13:00 yesterday it was announced a breakthrough was not imminent and this consequently saw the GBP/EUR drop below 1.16 for the first time in a week.
By the end of yesterday the rate was back above 1.16 which is where we find ourselves this morning. All hands are still on red alert as the UK negotiation team essentially has one week before the House of Commons take a vote on Theresa May’s deal. If they haven’t got something in place by that point we may see the control move away from the PM and article 50 extended.
There is potentially an element that even though a deal isn’t imminent it does sound as though some sort of negotiations are taking place. Previously we would have expected to see an immediate rejection from the European Union of having talks but that seems to have changed.
There should also be a mention towards the fact that the EU always seem to leave their negotiating to the last second, recent situations in Greece and Italy are prime examples of eleventh hour talks and we’ve still got days left so expect this to continue. Sterling in my opinion is poised for any news from Brussels and I would not be surprised to see the 1.17 re-tested before the end of the week.
Yesterday afternoon Governor of the Bank of England Mark Carney reported that the Central Bank was as “ready as they can be” for a no-deal decision on Brexit. However potentially more interesting was the inflation level currently being above the Central Banks three year target.
Arguably the uncertainty surrounding Brexit has done little to promote any interest hikes of late but should the UK gain a deal and see an end to Brexit uncertainty, the Bank of England (BoE) may find themselves delivering a few quick rate hikes.
The BoE could well have a massive influence over the next few months as the UK could well be on a positive path depending on how Brexit plays out. If you’re looking to purchase Sterling in the near future then acting sooner rather than later could protect you from any positive Brexit developments.
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