Today's Pound Sterling report discusses how the Pound may perform against the back-drop of Brexit negotiations and political uncertainty, whilst also having a look ahead at factors that could impact GBP exchange rates next week. The table below shows the movement for a number of GBP currency pairings in the last month:
|Currency Pair||% Change||Difference on £200,000|
To view live interbank exchange rates click here.
Whilst the UK bathes in record temperatures this week the sun is definitely not shining on Theresa May or the Pound. Sterling has been testing fresh lows following the UK election result and uncertainty in Parliament is being mirrored by uncertainty at the Bank of England too.
The list of political woes is endless with Theresa May still struggling to form a majority government with the Democratic Unionist Party (DUP), the Scottish National Party SNP saying they will block Brexit legislation and Brexit negotiations starting badly.
Political uncertainty is without doubt the main backdrop to the recent and more general demise of the Pound seen over the last 18 months and I cannot see this changing anytime soon. With little economic data for the rest of this week clients looking to buy or sell the Pound need to be on their guard against any sudden change, particularly those clients looking to buy a foreign currency with the Pound.
Many clients gambling on higher exchange rates following the UK election have seen their position worsen by ignoring the warning signs politically and economically for the UK. Higher Inflation and lower wage growth means falling living standards and the UK founds itself the slowest growing economy for Q1 versus much of the Eurozone.
It isn’t all bad news of course, all of the political uncertainty means a softer Brexit is now more likely, and this would see the Pound more comfortable in the future. Yesterday Government borrowing was less than expected and the prospect of the UK raising interest rates (which would strengthen the Pound) is presenting small opportunities.
Yesterday it was the turn of Bank of England (BoE) member Andy Haldane to throw his hat into the interest rate debate giving the market a hint he thought UK interest rates might rise sooner, which caused Sterling to jump around half a percent. Expectations last week that the BoE would raise rates sooner were dismissed on Wednesday by Governor Mark Carney only for them to be raised again yesterday.
Unfortunately for clients looking to buy foreign exchange with the Pound they are being reduced to grab at these threads of opportunity. From most neutral standpoints the Pound remains in a very tricky place and further weakness is difficult to argue against.
Next week is another tough one with the latest UK GDP (Gross Domestic Product) figures for Q1 and the parliamentary vote on the Queen’s speech. Whilst expected to be passed there is an outside threat Jeremy Corbyn will mount some kind of unexpected challenge which should be making clients holding the Pound very nervous.
This evening at 7pm Kristin Forbes another MPC member will speak, whilst she has been voting for a hike she is due to leave at the end of this month. The market might not take too much notice but it is these comments from BoE members which have been the trigger for the latest short term movements on the Pound.
A €300,000 purchase is now £5,000 more expensive compared to before the election. With the Pound struggling if you are looking to get the best rates it is important to keep in contact with your account manager and the team here to highlight potential opportunities or warn of further declines.
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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