Daniel Johnson
Senior Executive Dealer
Sterling close to an 8 year low against the Euro
Brexit and political uncertainty are weighing on the Pound. With current levels against the Euro at a near 8 year low, will Sterling continue to drop?
This Pound Sterling report discusses the current factors influencing the Pound's value and looks ahead to next week's data releases and how they may affect GBP exchange rates. The below table shows the market movements for a number of currency pairings in the last 30 days:
| Currency Pair | % Change | Difference on £200,000 |
|---|---|---|
| GBP/EUR | 0.5080% | €1100 |
| GBP/USD | 0.4932% | $1260 |
| GBP/CAD | 0.4371% | CAD $1400 |
Is there any basis for a potential Sterling rally?
If you remove the anomaly of the flash crash in October 2016 Sterling now sits at an eight year low against the Euro, currently sitting in the 1.08s. There has been news regarding UK business confidence and Eurozone growth which has also been a catalyst for current GBP/EUR levels. I am finding it increasingly difficult to find any basis as to why we could see any significant gains for Sterling.
Political uncertainty is major factor in the Sterling value. While Theresa May’s position is in jeopardy the Pound stands little chance of making any substantial gains. There is a growing number of members in the Conservative party who have little confidence in Theresa May’s ability to conduct her role as Prime minister.
This issue does not look like it is something that is going to be put to bed quickly and it is highly probable this will keep the Pound at a low level against all major currencies.
Brexit is another key factor in the value of the Pound and will be for the foreseeable future. There is a lack of clarity on the UK’s Brexit stance and the markets do not react well to uncertainty. Brexit white papers are being released in drips and drabs but each release does not have the impact to strengthen Sterling. Until we have further clarity on how Brexit negotiations will pan out the Pound will continue to struggle.
With many of the world’s top banks predicting parity on GBP/EUR exchange rate by the end of the year. If you have a requirement which involves selling Sterling it is looking like it may be a wise move to bite the bullet at current levels.
Consumer Confidence and Manufacturing PMI could cause further problems for the Pound
Consumer Confidence is due on Wednesday and measures the level of confidence the consumer has in current economic conditions. This is of particular influence considering the current high levels of inflation which is not matching up with average wage growth, which is some way behind.
Manufacturing PMI is released next Friday, it captures business conditions in the manufacturing sector. Manufacturing makes up a significant amount of GDP and as such can influence Sterling strength. This is not a data release I would hang on for if I was hoping for Sterling gains. I think there is the possibility of a fall and its influence does not warrant waiting for a week to trade.
Thank you for reading my Sterling currency report, if you have any questions about GBP exchange rates I would be more than happy to discuss them – you can contact me with any queries at dcj@currencies.co.uk.
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A. Hawgood
UK
From start to finish with all contacts you feel like a VIP client even if you are exchanging small amount of currency. Always polite cheerful and give you straight talking advice before making the decision. Daniel Johnson and the team are a pleasure to deal with.
C. Lafferty
UK
Daniel Johnson was very helpful throughout the transaction. It was quick and hassle free. I would definitely use this method again.
D. Scamans
Excellent… can’t fault it… Thankyou Daniel.
I. Armstrong
UK
Daniel Johnson explained clearly and in an easy to understand way what the process would entail before I made the transaction to pay the deposit on an overseas property. The transaction was carried out in an efficient and timely manner and I felt no pressure at any time.