Sterling exchange rates have been climbing recently and the interbank now sits on a 2-week high against the USD and over a month high against the single currency. The pound is now up over a percent against the euro and over 1.5% against the US dollar over the last 7 days. Saying that, markets do not move in a straight line, moving forward over the coming days and with events pending today in particular, sterling could well fall before the end of the week.
|Currency Pair||% Change (Month)||Difference on £200,000|
Generally, despite Brexit-related uncertainty, the UK is expected to grow by 1.3% this year. This is only 0.1% down from last year. The continual uncertainty over the timelines and what any Brexit deal will look like has hit confidence in investments, personal finances and corporate confidence. This is reflected in downgrades to economists’ forecasts for investment and profit growth since last autumn.
Retail figures however have been performing generally well in the UK as a result of low unemployment and real wages climbing. A recent report even showed that UK retail sales grew in April for the first time in five months in a survey conducted by the Confederation of British Industry. Recently, UK Government borrowing figures showed a fall to £24.7bn for the 2018-19 financial year, a 17-year low.
Cross-party talks have once again started in the hope of finding a path forward in Brexit talks, but with most now thinking a politician rarely agrees a deal early, late October may be the timeframe for a deal. Even though Brexit continues, it is worth noting that as a result of the default position changing from a no deal cliff edge, GBPEUR interbank rates are now over 5 cents higher than they were 3 months ago a difference of 4.5%.
The Bank of England (BOE) takes centre stage economically today for the pound with their latest policy changes announced and a speech by the head of the bank at their Quarterly Inflation Report.
No policy change is expected but any change in growth forecast by the bank or suggestions on the potential timeframes of any change in interest rates could well move the pound's value. The current governor is also set to leave by February of next year so any suggestion towards his predecessor could also influence the pound's value.
Politically the local elections taking place today should be of interest to those with exposure to the GBP in the short or medium term. The Conservatives are bracing for mass losses as voters are expected to abandon the party amid mounting anger to deliver Brexit. New polling indicated the party could well loss more than 1,000 seats and even the Party's deputy chairman admitted that it is “going to be a difficult night." Depending on the result, if it portrays an even weaker Government this could result in sterling losses.
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