This Pound Sterling update discusses yesterday drop in Sterling value, Brexit negotiations and the factors that could affect GBP exchange rates in the coming days. The below table shows the market movements for a number of GBP currency pairings in the last 24 hours:
|Currency Pair||% Change||Difference on £200,000|
Just over a week ago UK inflation rose to 2.9%, 0.9% above the Bank of England’s target. The reason for the rise is that since the UK referendum decision people have sold off sterling, which in turn has made the currency weaker and therefore increased inflation levels. Three days later the Monetary policy committee from the Bank of England voted in favour of keeping interest rates on hold however three members surprised the market by voting to raise interest rates, which gave the Pound a boost.
However yesterday morning Governor the Bank of England Mark Carney devalued the Pound by stating Brexit is likely to make people poorer and the time is not right to raise interest rates. The Governor went on to say wage growth is falling and the future of the economy is unclear due to Brexit.
The comments made by Mr Carney do not surprise me and I believe interest rates will remain on hold until the Bank of England know the kind of deal that the UK will receive.
At the same Mansion House meeting the UK Chancellor Philip Hammond supported the Governors views and went on to call for a smooth Brexit to protect businesses within the UK. Both the comments made by the Governor and the Chancellor indicate to me that a softer Brexit will be the approach taken by the UK however the Pound remains under severe pressure.
For anyone buying a foreign currency with the Pound short to medium term I expect Brexit negotiations to continue to be the driving factor for sterling exchange rates. UK and EU officials are set to start discussing how much the UK will pay to divorce from the EU and I believe a deal will be eventually struck.
However in the meantime I wouldn’t be surprised for the press to release reports that negotiations are not going smoothly and therefore I expect the Pound to continue to devalue. The safe option in this market for clients selling the Pound to purchase a foreign currency is to be making plans sooner rather than later.
Today at 11:30am Queen Elizabeth II will read out the government’s plan moving forward for the next 12 months. The speech is set to outline Brexit, immigration and counter terrorism legislation. As Theresa May did not win a majority, it has been reported that leader of the Labour party Jeremy Corbyn will vote down the speech in a bid to remove the Prime Minister and the potential Conservative – DUP minority government.
MPs will vote on the 28th and 29th June to decide whether Corbyn can dismantle Mrs May. However for this to happen Conservative MPs will have to vote against the Conservative party and I can’t see this happening. Keep a close eye on this event as the Pound could strengthen or weaken depending on how the Queen's speech is received by the market.
For more information on how future data releases could affect your currency transfer call our trading floor on 0044 1494 725 353 or email me directly here.
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