This Pound Sterling report will address the factors that could have an effect on exchange rates over the coming weeks and months. The table below looks at the difference between the rate you would have achieved when purchasing £200,000.00 at the low and high levels during the past month.
|Currency Pair||% Change||Difference on £200,000|
Sterling’s run has cooled of late, with the Pound finding little support so far this week against the majority of major currencies. GBP/EUR rates have found resistance in the 1.13’s, whilst GBP/USD has struggled to make any significant impact above 1.34. This downturn in fortunes has come despite the recent announcement that EU leaders have agreed to move Brexit talks on to the second phase.
The news, which was confirmed by European Council president Donald Tusk, finally put to rest any concerns investors had that talks were still not progressing as indicated.
Many analysts had predicted that the announcement of progress in Brexit talks could help alleviate further pressure on the Pound, which in turn could have driven support higher and the Pound's value up as a result. However, the opposite seems to have occurred and investor confidence has waned.
Sterling's drop is likely due to how tough the next round of Brexit talks are predicted to be and the potential obstacles that could harm any separation deal being agreed.
We are now entering the key components of the UK’s separation from the EU and the relationships that will remain, particularly in terms of what trade deal the UK will be granted with its closest neighbours.
We are likely to see tensions rise and I would be surprised if this didn’t have a negative impact on Sterling’s value over the coming months.
The first round of negotiations were far more tedious than most experts had predicted and it does make you concerned about how the UK government will navigate the second phase of talks.
A close and open trade deal is key for the UK’s economic well-being and ultimately Sterling’s value over the coming months. With years of potential economic prosperity hinging on the outcome of these talks, it is clear that Brexit and its final outcome is going to drive market sentiment and ultimately Sterling’s value through 2018 and even beyond.
Whilst deep rooted concerns remain regarding how the UK economy will evolve over the coming months, this does not mean that those clients holding the Pound will not have opportunities in the market.
As we’ve seen the Pound has at least gained a foothold over recent weeks, following the positive developments in Brexit talks. With key data this week in the form of UK Gross Domestic Product (GDP) figures on Friday, along with Bank of England (BoE) Governor Mark Carney’s speech tomorrow, could we see any potential spikes for the Pound?
Whilst Carney’s speech is not anticipated to drive market sentiment, he was positive in his tone during his last address when discussing the UK economic improvements in recent weeks. If this tone continues and he were to allude to any further interest rate hikes in early 2018, it is likely the Pound would benefit as a result. Similarly if the GDP figure comes out above the 0.4% growth expected, then we could see the Pound make gains ahead of the Christmas slowdown.
Personally, I am extremely risk adverse when it comes to the current market and I would be looking to protect my Sterling positions during these uncertain times.
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