The pound across the board has been falling following its surge after the general election in December last year. The stalled markets anticipate further trade news from the EU or UK which will give investors and traders some insight into the future of the UK/EU relationship. The GBP/EUR currency pair It can still be left very open to volatility as even the slight hint of direction, could mean impulsive decisions from investors.
The start of the month set in stone that we left the EU which means we have just over 10 months to finalise a bill and put this into law. However, this is still open to a variety of outcomes.
We have seen Boris push for a “Canadian-Style Deal”, this means an open trade deal with a removal of almost all tariffs (98%) which allows a free flow of trade. The EU-Canada negotiations began in 2009 and came into force in 2017. With the UK’s finance heavy service to the EU, will this work as well as a product driven Canada?
Boris has also stated that if the EU doesn’t “play ball” then he will settle for an “Australian-Style deal”. This is a more polite way of saying “No-Deal” as it would be based on WTO (World Trade Organisation) terms and will also include tariffs. As mentioned before the UK’s economy has a large finance base with the majority of the UK’s services in the EU providing banking and other financial services. These types of services are hard to tariff as it’s not a physical goods and is all data-based products.
The dollar has gained further ground on the back of recent positive economic data. Investors have also moved across to the safe-haven dollar during the Coronavirus outbreak as Asian market values plummet. With cases all across the EU and now a fourth case over the weekend in the UK, the safe haven currency has reached highs close to September 2019 touching 1.0942 against the single currency.
The highest GBP/USD interbank exchange rate we have seen this year touched 1.2881 on Friday’s closing of trading.
The Labour party have seen some setbacks on the leadership race as front runner Sir Keir Starmer has been accused of a data breach. The Labour party has sent an official report to the Information Commissioner asking for an investigation into the hacking of the party’s membership database. This was met with Starmer denying the claims and said it was “nonsensical”.
Labours Shadow Minister Jon Ashworth says this could be the “end of the party” following the devastating defeat in the previous general election, which saw votes hit their lowest since 1935. Combined with the mess of the leadership race and low membership figures this has left many major party figures doubting the party’s ability to hold its ground.
Ireland had their election over the weekend with polls coming out saying there is very little difference in terms of percentages between the candidates. This is likely to affect the UK’s exit as it may give more light on Irelands perception around the boarder. The Irish elections work similar to the US as it works on a “knock-out” election where candidates are voted out to leave the favourites competing.
Already there is talks of coalitions within the Irish elections as the 2 candidates leading the exit polls suggests there may be a joint 22% favour.
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