Article 50 has now been triggered and the negotiations to break up the 40 year marriage between the UK and Europe can now officially start. Initially the reaction on the currency market has been positive for the Pound’s value as some uncertainty evaporates. This has helped GBP/EUR levels reach over a 30 day high which is in turn an opportunity for clients needing Euros near term. However this is not a topic for clients to now ignore, as the European officials begin to openly discuss their negotiating position. The Pound is highly likely to enter a more volatile period.
The guidelines to the negotiations were released at the end of last week which makes it a little easier to assume how things will progress. This however will be confirmed at the first Brexit EU meeting towards the end of this month; what is worth noting is that this coincides with the timing of the French elections.
On Friday we had the latest economic update as we start a new month and the next cycle of economic data. GDP figures were released and showed a positive figure, far from the collapse in the UK’s economic performance that was predicted from ‘Project Fear’ last year.
GDP rose by 0.7% between October-December last year meaning that Britain grew by 1.8% in 2016, just behind Germany at 1.9% but ahead of the other G7 members.
Activity within the UK manufacturing sector has climbed over the last 12 months but a majority of this has been from the fall in Sterling’s value helping make UK PLC more attractive internationally. Raw materials however have been climbing in value over this period and with Sterling falling it has added to the woes of many manufactures who import components from abroad. We have the latest figures released today at 9:30 and I expect this to still remain strong, but watch out for even the smallest contraction in activity as it could signal a change in economic performance that many experts have been forecasting since the Referendum. Depending on whether these concerns materialise, I believe this could set the trend for Sterling’s value this week.
Data released today will also have an impact on Sterling’s value as forecasters update expectations for the more detailed releases on Friday of this week; this includes productivity figures along with trade and industrial figures. The Confederation of British Industry reported recently that optimism among British manufacturers reached its highest level since February 1995.
I personally see this as a risk for Sterling’s value and would not be surprised to see levels lower towards the end of the week.
If you have a foreign currency requirement you may be prudent to get in touch with us sooner rather than later whilst the Pound remains in better form. Call our trading floor on 01494 725 353 or email me here to retrieve a quote.
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