Sterling's value has been under considerable pressure of late and the interbank rate has dropped in value against the euro by over 5% and nearly 3.5% against the US dollar over the last 30 days. Most of this drop could be attributed to the political shift in Westminster, and the huge unknowing about how it will impact Brexit negotiations going forward.  

Currency Pair% Change (Month)Difference on £200,000
GBPEUR3.4%€8,000
GBPUSD3.6%$9,400
GBPNZD3.5%NZD $14,000

UK Prime Minister Theresa May stood down as the leader of the Conservative Party but remains PM until her replacement is chosen. Boris Johnson is the clear favourite as her replacement looking at betting odds but there are 10 applications for the post which will be whittled down over the next 30 days so there is the potential for many upsets. This afternoon the first vote is taking place with any of the candidness who fail to secure over 17 votes being eliminated from the contest.

The impact of a change in leadership in number 10

It is widely concluded that whoever the next PM is, all would look to re-negotiate the current deal with Brussels. To get something more from Europe they would have to open negotiations with the prospect of either a no-deal or a delay on the table, both of which are expected to be negative for the pounds value. Mr Johnson spoke yesterday and started his campaign for number 10 and said that he did not think No Deal would happen, but that had to be kept on the table.

Potential time lines of politics on Brexit

Potential time lines of politics on Brexit

Most PM candidates have now released their campaign pledges. The vote for the next PM is expected to be concluded by the middle of July, just in time for the summer recess in Government. Westminster will then re-open in September with just 2 months for any change in Brexit to be re-negotiated alongside carrying out the role of running a country for whoever the next PM will be. Generally, there seems to be the options for either the UK to take the current deal on the table, negotiating a new deal, leaving without a deal or further extension. With the prospect of Government accepting the current deal on the table rather slim and the others re-opening the world of uncertainty for UK PLC, the pound may remain under pressure as a result.

Mixed economic data for the UK drives its value

Outside of Brexit and political news, economic data continues to be released reporting on the health of the economy. Recently we have had a real mix in releases with UK Unemployment remaining unchanged at 3.8%, which is the lowest seen since December 1974, and wage growth improving. Women employment is now at 72%, the highest on record. Generally, with lots of political uncertainty around immigration rights, employment by UK nationals has risen and with wages climbing to find the right people.

UK Manufacturing falls for the first time in 3 years

UK Manufacturing activity has however fallen and contracted for the first time in three years in May, according to PMI data released last week. The car manufacturing sector was one of the largest hits as global car sales dropped. UK Car sales fell 4.6% in May and we had the news that Ford's engine plant in Wales will close with a loss of 1,700 jobs.

Next on the horizon is all important Retail figures released next week. Another area of the economy under considerable pressure so one to watch if you have exposure to the pound going forward.

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