This Sterling report will address the factors that could have an effect on exchange rates over the coming weeks. The table below looks at the difference between the rate you would have achieved when purchasing £200,000.00.
|Currency Pair||% Change||Difference on £200,000|
Sterling exchange rates are likely to see a hugely volatile end to the week after the EU summit concludes today in Brussels. There could be some excellent buying opportunities if it is deemed that “sufficient progress” has been made. The markets are eagerly awaiting official confirmation on whether Brexit negotiations can move on to the second phase to discuss future trade. Any positive statements that indicate the door to a future trade arrangement is now open are likely to result in a boost in the price of sterling. The sticking point though is that the EU are now insisting that the agreement that was made last week is to be made legally binding i.e. for Britain to pay the divorce settlement before any trade discussion has even begun. This key element in my view makes a no deal scenario a distinct possibility.
EU President Donald Tusk will be making a statement at 10:00 (UK time) with Theresa May expected to follow shortly after.
The vote in the House of Commons on Wednesday night that the government lost also creates a degree of uncertainty which is not helpful for sterling exchange rates. A key vote next week on whether the withdrawal date is to be enshrined in law could also create some volatility although there is a chance next week’s vote may not now go ahead.
Any formal agreement that trade discussions can commence should be seen as very reassuring for business in the UK and could see the Pound rally back to the highs seen last week. A jump higher to 1.15+ seems a likely move if all goes well today and if formal arrangements are made. Clients would be wise to get in touch with your account manager ready to take advantage of any spikes today.
Any move higher for the Pound is likely to be limited due to the fact that the trade discussions are expected to be more complex and will take a long period of time to get through. The Irish Prime Minister Leo Varadkar summed up well the current state of Brexit affairs when he said “This is not the end but it is the end of the beginning.”
The Bank of England held interest rates as widely expected yesterday maintaining levels at 0.5%. The accompanying minutes highlighted that economic growth in the last quarter may have stalled which is a concern for the British economy and hence the Pound going forward. However the central bank did acknowledge that the Brexit talks are now moving forward after the agreement that Theresa May reached with the EU last Friday and suggested that this may restore confidence for consumers and businesses alike and could help boost the economy. The vote was 9-0 to hold and the bank want to monitor Brexit discussions and the impact of the last rate rise in November before taking action.
UK data is light today although the Bank of England will release its Quarterly Bulletin this afternoon and Chief Economist Andy Haldane will also be speaking.
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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