This Pound Sterling update examines factors that could affect GBP exchange rates this week. The below table shows the movements of a number of currency pairings yesterday:
|Currency Pair||% Change||Difference on £200,000|
For any clients that read our reports regularly, exactly one year ago today I wrote this very same report with potentially the biggest news the UK economy will ever see. One year ago today we voted to leave the EU. The past year has seen a roller-coaster of political events that have caused the Pound's value to drop by over 20 cents against the Euro, meaning this time last year, on a £200,000 transfer the monetary difference would be €40,640.
The Pound has been one of the worst performing currencies of late following both seismic political and economic events. This has left the UK in a vulnerable position and somewhat in limbo, therefore causing investor confidence and sentiment to be weakened and cause the pound to drop in value.
Yesterday it was announced that the DUP (Democratic Unionist Party) and conservatives were close to reaching an agreement following the disappointing election result nearly two weeks ago. Although this alleviates some of the political uncertainty, there is still a feeling of unrest currently in the UK. Yesterday, Theresa May announced that there could be as many of 600 tower blocks with the same type of cladding similar to that of the Grenfell tower block.
In my opinion, the current UK Government will no doubt have to think quickly to put the minds of those who live in these tower blocks at rest before more backlashes occur. This could provide a difficult upcoming period for the UK and could impact Sterling.
Whilst the political situation in the UK is still uncertain, the British economy seems to be slightly more positive. The news that the UK could raise interest rates soon was a shock to the market at last week’s policy meeting, and helped the Pound to lift some of the negatives from the election result. Since then, there have been numerous signs that will have helped to warrant a rate hike in the near future, most recently the manufacturing sector within the UK. Yesterday it was announced that as a result of the weakened Pound following Brexit and the global economy somewhat recovering, UK manufacturers are experiencing the best number of factory orders in 29 years.
This means that next week’s GDP figures will be scrutinized to give the Bank of England even more food for thought as to whether now is the correct time to raise interest rates. Any positive news is likely to give the Pound a positive yet quick boost as I think that political unrest still weighs heavily on the Pound. For this reason, being in contact with a broker can help you to capitalise on any short term movements if you are buying foreign currency with Pounds.
For more information on how future data releases could affect your currency exchange call our brokers on +44 (0) 1494 725 353.
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