It’s been a rather intense second half to the month for Sterling exchange rates, with the markets seemingly struggling to keep up with the ever-changing faces of the UK’s negotiating team leading the latest Brexit talks with the EU. The Sterling report below looks into some of the high and lows for GBP and the reasoning behind them. The table below displays the range of exchange rates in a number of currencies, showing the difference in return you could have achieved when selling £200,000.00 during the past week.
|Currency Pair||% Change||Difference on £200,000|
In the last 2 weeks, the Pound has fallen to 15-week lows against the Euro whilst plummeting to near 12-month lows against the Dollar.
Evidently, with the change in faces leading the way comes the natural question marks around a potential change in policy. What do the last 6 months of “progress” truly represent if the names that put them forward are no longer there to push them through?
With a reasonably impressive recovery during Q2 for the UK economy and Q3 looking set to go even better there seems to be very little stopping the Bank of England from raising rates at their MPC meeting in August. This would normally send Sterling higher. Instead, the pound looks set to potentially test post Brexit lows, once again highlighting just how heavy British political baggage is proving to be on sterling exchange rates at present.
It will be interesting to see how the markets react to last night’s release that PM May will personally be taking charge of Brexit talks having only just brought Raab in to replace David Davis as Brexit secretary. Whether or not this will speed up negotiations and help the EU and the UK find middle ground more convincingly remains to be seen, but I am of the opinion that it will bring a decisive edge to matters.
If by taking full control Theresa May can galvanise her cabinet, then the UK will be in a position to provide the markets with the clarity that it craves and I would expect Sterling to drive in value as a result.
If however the ball does not get rolling fast enough, the PM will have no one to hide behind, meaning the route to the next general election will be fast tracked along with severe sterling losses.
Either way, I feel the end destination is a lot closer following May’s move and added volatility on sterling exchange rates should be expected.
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