This Pound Sterling report discusses the factors that are likely to affect exchange rates if you are buying abroad or making a currency transfer. This table shows the market movements for a number of currency pairings yesterday:
|Currency Pair||% Change||Difference on £200,000|
A new cabinet may now be in place but the political uncertainty will almost certainly continue with a minority government. An agreement between the Democratic Unionist Party (DUP) and Conservative government is expected in these coming days and how this all pieces together and also the public response to it will likely create additional volatility for the Pound.
What we do know for sure is that Brexit negotiations are supposed to start the week commencing 19th June after the Queen's speech. It has been reported however that the Queen's speech may be delayed by a few days adding to Sterling’s woes and taking GBP/EUR to a seven-month low.
The Queen's speech is in my view the next major focal point which could end up in controversy and major political uncertainty, worse than we saw on Friday. Jeremy Corbyn has said he will look to make an amendment to the Queen's speech and has made it abundantly clear he would like to oust Theresa May. If Jeremy Corbyn was able to vote down the Queens speech as he seeks to then there is a slim chance he could try to form a government after a vote of no confidence. This would of course carry major implications for the Pound.
So far, the dip in Sterling whilst a sharp shock has been somewhat limited. This may be because some politicians are now calling for a softer Brexit and one that could see Britain ultimately remain in the single market. The “no deal is better than a bad deal” has come into question.
Meanwhile Moody’s the credit rating agency has also warned the election result is credit negative for the UK. This all comes at a time when the EU is expected to delay by a year if the government insists that a future trade deal and divorce settlement are to be discussed at the same time.
This morning sees UK Consumer Price Index inflation numbers which may give some cause for concern for the Bank of England. Tomorrow sees UK unemployment numbers where the figure is expected to remain steady at 4.6%. The Bank of England meet on Thursday but there is very little chance of change amidst the elevated political uncertainty. A dovish stance is to be expected which could put added pressure on the Pound.
There really couldn’t be much more happening in these markets. The prospect of a leadership challenge, the possibility of another election, the chance of a change of government are all major risks for Sterling and this is all on top of Brexit.
Those clients with a pending requirement would be wise to get in touch to look at the options available and take the risk out of it.
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