Sterling exchange rates closing in on post Brexit lows

Despite some relatively good economic data releases in terms of both business surveys as well as hard data, the Pound has struggled to gather any lasting momentum against almost all other major currency pairs. This has been the case since the Brexit vote back towards the end of June. Since the initial drop the Pound has found itself trading within new ranges and I’ll use the GBP/EUR pair as an example.

It’s been trading roughly between 1.15 – 1.20 at the mid-market level since the initial drop after the vote where it hit its very lowest of almost 1.14 and a half.

In the recent weeks we’ve seen the Pound gradually decline as talk of an early, hard Brexit without access to the EU’s free market has begun to surface, which has softened the Pounds value along with an inflation figure which didn’t quite meet the markets hopes.

What should Sterling sellers be aware of right now?

Those that need to convert Pounds into another major currency pair should be aware of the current Sterling exchange rate levels across the board in my opinion.

The Pound is within 2 cents of its 52 week lows against the Australian Dollar, US Dollar and the Euro and these levels are also 3 year lows, or in cables (GBP/USD) case, a 31 year low. I’m expecting to see some support for the Pound around these levels but I do think that should these benchmarks fail to provide any strong support; we could see the Pound heavily sold off. Do bear in mind that we’re some distance from unprecedented levels so further declines shouldn’t be ruled out.

Looking into the Pounds historic trading levels is one way of attempting to determine its future price movements, another is to look into official market sentiment and speculative (currency trading/betting) figures.

Speculators provide us with their insight, and the key times to look out for this week

The US Commodity Futures Trading Commission (CFTC) produces market reports for the public and industry participants about the futures and options market. The key news out last week is that speculative investors have significantly added short/sell positions on the Pound, with the figure up $2.3bn in a week. For those unaware of what short selling is, its betting that a financial product, in this case the Pound, will fall.

With many in the financial betting industry increasing their bets on further declines for Sterling, and with a number of major institutions forecasting further falls for the Pound, it may be some time until we see the currency trading back at the top end of their current trading ranges, let alone pre-Brexit levels.

If you’re working on a budget or with a near term deadline and would like to consider removing the risk of further falls from the exchange, feel free to call in for a live trading levels on 01494 725 353.

At 9.30 each day this week except Thursday there will be an economic update from within the UK, with today’s Manufacturing PMI figures to begin the week. A drop is expected on the previous figure which was a 25 year high. Friday is likely to be the busiest as the National Institute of Economic and Social Research will release their predictions for UK GDP over the past 3 months with 0.3% the expectation.

The major news out over the weekend has been UK Prime Minister Theresa May’s announcement that Article 50 will be invoked at the end of March in 2017. This hasn’t come as a shock to markets as Boris Johnson did suggest this last month but Sterling exchange rates have weakened slightly this morning, most likely off the back of this news.

Further news as to when Theresa May will trigger Article 50 could cause Sterling to lose further ground. If you have an upcoming currency transfer we suggest getting in touch with our team to discuss your options. Call our trading floor on 01494 725 353.


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