This GBP update discusses the latest Brexit news and events that could affect Pound Sterling exchange rates this week. The below table shows the market movements for a number of currency pairings in the last month:

Currency Pair% ChangeDifference on £200,000
GBPEUR3.12%€6940
GBPUSD3.82%$9980
GBPCAD5.16%CAD $17140
Sterling strengthens on hopes of Brexit progress

Irish border talks help the Pound gain further across the board

At the time of writing this report, the Pound had risen by nearly 2.3% against the Euro, with the main reason for yesterday’s climb being put down to the latest progression with the Irish Border. Earlier this week, the Pound gained following reports that the UK and EU had agreed on an amount to be paid for leaving the EU otherwise known as the ‘Brexit Bill’. This was one of the two key issues put forward by the EU. EU negotiators have gone as far as saying that the phase 2 of the Brexit negotiations (due to start in the next few weeks) wouldn’t begin until the divorce settlement and Irish Border had been agreed. With both of these having been agreed in principle, the Pound has started to recover some of its recent losses.

According to reports, the EU are now willing to offer UK a transitionary deal which would last for 2 years as soon as January. After this transitionary deal has been agreed talks on future partnership with each other would begin. In my opinion, this is the news that investors have been wanting to hear and the main reason why Sterling has strengthened.

However, with Brexit nothing is that simple. Late last night, reports emerged that if Northern Ireland are treated any differently from the UK in the deal arranged with the EU, then the Democratic Unionist Party would pull the plug on the ‘prop up’ deal. The deal would see customs checks removed from the border and put on the major ports of the Irish Sea in order to avoid a hard border, however this is seen as risky for Northern Ireland and the Democratic Unionist Party, for whom our Government relies on. This could create volatility on Sterling exchange rates in the up and coming weeks if this isn’t rectified with the DUP, not only could they tear apart the UK government, but the Irish Prime Minister Leo Varadkar has outright refused to allow second phase Brexit talks to proceed if the hard border problem isn’t sorted.

Where next for Sterling exchange rates?

As politics seem to be the main driver for Sterling at present, a word of warning for any clients holding out for sterling to rocket, the Guardian newspaper has claimed that Conservative Euro-sceptics are prepared to vote against the final deal put forward by Theresa May if the UK continues to pay the €50bn for years to come or does not get good trade terms – quoting that saving €50bn and trading under World Trade Organisation terms would be a far better option.

As we have seen many times throughout this year so far, the Pound has the capabilities of weakening before any substantial gains are made. If you do have a requirement, get in touch with your trader to put a plan in place to minimise any volatility.

The only worthwhile data release today for the UK is the latest set of manufacturing data. A pick up in global trade and a weaker Pound of late has meant that manufacturing orders have been extremely healthy of late. Any signs of a slowdown would be negative for the Pound and vice versa if the figures are positive. Next week brings the latest set of data for the economy to digest from November, expect a busy week for data releases.

For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.

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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.