Sterling driven by politics & "fat fingers"

The pound continues to remain under intense pressure against all of the major currencies primarily as result of the strong stance from UK Prime Minister Theresa May last week and the expectation that Britain will follow what has been dubbed a “hard Brexit”. There is no shortage of factors creating added volatility. The Flash Crash last Friday where sterling fell by 6% in the space of minutes in overnight trade still hasn’t officially been accounted for either.

Possible reasons include a “fat finger” transaction, automated trading algorithms (computers making large trades automatically) or the news story when French President Francois Hollande made clear that Britain must pay the price for Brexit. There is every chance we may see more of this type of unusual activity. Be sure to speak with us to discuss your options to take the risk out of the volatile currency markets.

Politics will continue to dictate the rates of exchange for the pound as there is still another 6 months to go before Article 50 is invoked and the countdown for exit negotiations begins. The pound for the moment has effectively become a political currency where high volatility occurs on political news, something that is normally reserved for less developed economies.

Sterling volatile over Brexit legal challenge

There is likely to be considerable more volatility for the pound amidst the Brexit uncertainty following a high court case which started yesterday which looks to force the British government to seek parliamentary approval before invoking Article 50. The government wishes to use prerogative powers to withdraw from the EU without a vote in parliament, in light of the democratic mandate given. A verdict is expected by the end of the month although it will probably be appealed to the British Supreme Court with a final decision expected by the end of the year. This is hugely important as the decision could dictate the terms of Brexit and this will directly impact on the price of sterling. There could be a major political storm brewing and a real risk for the pound.

Sterling & "Marmitegate"

With no economic data today eyes look forward to UK inflation released on Tuesday and could result in a volatile market. . Inflation will almost certainly rise in the months to come so it is just a case of when it shows up in the official figures. Inflation is highly topical at present with the Unilever story breaking yesterday after Tesco refused to stock their products which includes Marmite, at inflated prices. As of this morning “Marmitegate” is toast in what could have been a long and interesting standoff considering that Tesco’s boss, Dave Lewis in fact worked for Unilever for much of his career. Questions have also been raised over the approach from Unilever as critics state the firm would have likely hedged its currency exposure. We at currencies.co.uk can offer simple forward contracts to clients to reduce exposure to the volatile currency markets. Meanwhile, Walls Magnums are back on sale!

Clients selling Euros for Sterling are now presented with the best time to buy in 5 years. Get in touch with our team today on 01494 725 353 if you would like to make the most of these highs.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.