Sterling rates have remained under pressure over the last week, falling by nearly 3 cents against the Euro since the weekend.
Last week GBP/EUR and GBP/USD rates were near the highest they have been for the year and even though GBP/EUR rates have fallen it is worth noting that ignoring last week, rates are still towards the highest we have seen for months.
Last week UK Retail figures were released and fell sharply by 1.5% in March, and registered their first quarterly decline since 2013. It seems the elusive inflation many economists have been forecasting is starting to hit the high street and therefore the value of the Pound. On Friday UK GDP figures are released and expected to show a disappointing figure too with figures coming in at 0.4% instead of 0.7%. This will most likely result in a further fall in Sterling’s value until the weekend as traders price in this expectation. I certainly see Sterling rates falling between now and the weekend meaning only GBP buyers should be potentially waiting.
It is just seven weeks until the UK General Election on 8th June. Much has changed in the nine months since the UK voted to leave the EU. The outcome from this event will almost certainly change the value of the Pound. At the moment the polls and bookies point towards a substantial increase in the Conservative majority. It seems there is little opposition currently and if confirmed will probably result in some Sterling gains. What I would say however for those waiting for this event is that this expectation is a very common opinion and was a large contributing factor to Sterling’s gains last week. As we get closer to the event, if this continues to be the expectation I would not be surprised to see Sterling climb further. Watch out for any change to this because if the Conservative win starts to look less likely I would expect to see Sterling fall in value quite significantly.
We have the first ‘Brexit Summit’ this coming Saturday so expect further fireworks which could easily impact the value of the Pound as of next week. It is expected to set the guidelines of what the negotiations will look like and could potentially confirm what would happen if the negotiations where to take longer than the two-year timeframe originally set. If that was to be the case I would expect the Pound to actually climb as it makes a ‘Hard Brexit’ less likely.
On the other hand, the Europeans could present a united front promising a challenging, time consuming and expensive divorce from Europe which would in turn be rather negative for the Pound making buying anything more expensive still.
In real terms with the French election less than a week away, the German elections later in the year and our own election weeks away, I don’t expect to see any negotiations or clarity for citizens, companies and member states. This event however I see as being more of a risk rather than an opportunity for anyone with GBP to sell, as a result it may be prudent to secure rates or hedge positions before the weekend.
Fridays GDP figures could set Sterling back and clients with a foreign currency requirement may be wise to get in touch with their personal broker. Call our team today on 01494 725 353 or email me here if you are yet to trade with us and would like to speak with someone regarding a transfer.
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