This Pound Sterling update examines factors that could affect GBP exchange rates this week and next, discussing the potential impact of the second round of Brexit negotiations. The table below shows the market movements for a number of currency pairings in the last week:

Currency Pair% ChangeDifference on £200,000
GBP/EUR1.79%€3,984
GBP/USD1.43%$3,280
GBP/AUD1.28%$4,336 AUD
Positive Talks between the UK & China

Brexit coming back to the focus for Sterling soon!

Brexit and the UK’s weak negotiating hand will soon be back in focus as next week starts the second round of negotiations. The reason Sterling is down 15% against most currencies is the huge uncertainty created by the vote to leave the EU on 23rd June last year.

With Brexit still leaving many more questions than answers the prospects for Sterling remains subdued, clients looking to buy a foreign currency with the Pound should be strongly considering their options and strategy.

If you have a transfer to make buying or selling the Pound there is no UK data today but after a turbulent week, now could be a very good time to be evaluating your position.

The Pound has been very sensitive to the increasingly mixed picture from the Bank of England. Interest rates are a key factor in determining a currency’s strength or weakness. The prospect of UK interest rates rising has been helping the Pound to rise, the decreasing chance has seen Sterling fall.

It isn’t just in the UK, central banks and interest rate expectations for both the US Federal Reserve and European Central Bank have been creating turbulence on financial markets all week. Trying to second guess comments and opinions from central bankers is no easy feat, hence the sudden shifts on exchange rates. Fortune on the currency markets will occasionally favour the brave but more often than not it is those who are most prepared and careful who reap the rewards.

Will the Pound drop lower?

With employment at its highest since 1975 and inflation likely to rise to 3% in the coming months there are many factors to indicate interest rates could be raised and henceforth the Pound would rise. However, wage growth is not matching the pace of inflation, living standards are falling.

Whilst we are closer than we have been in recent years I just cannot see the Bank of England going ahead as it would create massive uncertainty for millions as borrowing costs increase and it would choke off what economic activity there is. Any hike is in my opinion way down the line and this expectation will I believe cool much sooner than many think.

I have to ask myself where else apart from this will any Sterling strength really come from? A €200,000 purchase this morning would cost £2700 less than it would have on Wednesday. With the Pound lately it has been a case of one step forward and two steps back, the best strategy is to buy on the spikes in your favour because ultimately as soon as the Pound rises it hits a brick wall and slips back.

As discussed a big driver for the Pound has been comments by central bankers in the US and Eurozone causing swings on the Euro and the US Dollar. Today there is a raft of US economic data at 13.30 which could easily trigger some movements on Sterling exchange rates, please get in touch to discuss how this will play out if you are buying or selling the Pound.

For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me directly at jmw@currencies.co.uk.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.