Sterling remains fragile following the decision to leave the EU, we ask whether conditions will improve in the near future.
It’s been a fairly sparse week for UK economic data releases and as such the Pound has struggled to gain a foothold against either the EUR, USD or AUD. However, it’s often during these quieter weeks that you will see bigger market swings, as the little data there is can have a greater impact on exchange rates, than it might do under normal conditions.
The Pound has found life tough going for some time now and my opinion has been the same since the UK’s Brexit decision, and that is Sterling will struggle to make a sustained impact against the aforementioned currencies whilst so much uncertainty surrounds the UK economy.
That doesn’t mean that we will see Sterling move in a straight line, or that the current trend will last forever but it is clear that the current market sentiment around the UK economy and ultimately the Pound, remains cautious at best.
The UK economy is fragile and as such any negative data or comments by key figureheads is causing the Pounds value to drop. We currently find ourselves in a unique position and therefore investors are having to factor in multiple different outcomes and scenarios, which include a possible recession in the UK and another interest rate cut by the Bank of England (BoE) to name but two. If these scenarios come to fruition then it is likely to hurt Sterling’s value and it is entirely possible that we will see rates get worse before they get better.
For that reason, those client holding Sterling may look to protect themselves against further market losses, or at the very least should be contacting myself or one of the other senior brokers here at the company in order to discuss all the options available to them. We are here to help our clients maximise their currency exchange, even in an unstable and falling market and it is important to remember that market conditions can change quickly and aggressively, without prior warning.
If I had a Sterling position I would not be prepared to gamble on a short-term improvement without any tangible evidence and whilst I do feel that things are likely to improve for the UK as we move through 2017, I cannot see that improvement coming instantaneously.
Looking ahead and it is Friday’s Gross Domestic (GDP) figures, which will be key for investors and the expectation is for 0.6% growth, which is the same as previous. This is such key release as GDP figures are a benchmark for any economy and as such expect increased market volatility if the figures come outside of the expected remit.
The Pound does remain vulnerable but problems elsewhere in Europe and the US could take centre stage. Speak to our brokers if you have a currency exchange requirement that needs to be actioned in the near future on 01494 725 353.
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