Sterling's rate has remained very volatile lately as we get closer to the allusive Brexit deadline. With changing views on how Brexit will play out it has resulted in some large swings in the value of the pound, which may continue over the coming 6 weeks until there is some certainty on the outcome. For example over the last 4 weeks GBPEUR rates have swung by over 6 cents and the USD by over 5%. So timing a transfer well is incredibly important and indeed can make a significant difference to the value of a trade. Based on the movement seen on the interbank rake over the last 30 days, £200,000 could have achieved approximately an additional €12,000 or $10,000.
|Currency Pair||% Change in 1 month||Difference on £200,000|
Sterling's recent performance has largely been driven by Brexit. The latest is that there are potentially three possible options or paths that could be taken over the coming 6 weeks. Currently what I think to be the most unlikely is that Westminster take a massive U turn and accept the current deal on the table, this could bring Sterling strength as it gives the market some certainty on what the UK will look like thereafter.
Second option is: a no deal could be taken however this is also rather unlikely I think, this could be argued to be negative for the pound as it means we are on a 'back foot' negating future trade terms with our biggest trading partner, Europe.
The last option is to end up with an extension and this could be argued as eitherpositive or negative; it could be argued that more time means more opportunity to get a better deal for the UK which could bring pound strength, or indeed if there is more time it could re-open the option of a second referendum or an election, both of which may bring negativity in the near term. If an extension is given it is possible that the timeframe determines the direction of the market value thereafter.
The next key event in regards to Brexit is the PM's next vote, she has promised to return to the Commons on the 26th Feb with a further statement triggering another vote the following days.
Next on the horizon is UK Retail figures which is released this morning and could well show a surprise. The figures released are expected to show an expansion in comparison to December and the reason for this is how bad December sales figures were. Most retailers reported very poor sales figures over the festive season sighting that most shoppers seem to have bought Christmas presents early tempted by the black Friday and mass discounting seen in November. As a result, January’s figures, released this morning, are expected to show an expansion and therefore could strengthen the pound as we end the week.
In the event of sterling strength this could be a short term opportunity rather than a change in trend for the pound. Next week we have Unemployment data on Tuesday which is again expected to show some strains as the high street continues to suffer with large amounts of redundancies being announced and planned.
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