This update examines factors that could affect GBP exchange rates this week. The table below shows the market movements for a number of currency pairings in the last month:

Currency Pair% ChangeDifference on £200,000
GBPEUR5.3%€11,880
GBPUSD5.3%$14,340
GBPNZD4.5%NZD $16,780

Brexit negotiations continue to drive Sterling’s value

Theresa May’s much anticipated Brexit speech went ahead on Friday, as members of the press waited with anticipation for an insight into the UK’s revised strategy for leaving the EU. Whilst her bullish tone was expected, she reaffirmed many of her previous comments and as such I was left fairly underwhelmed by much of what was said.

The key points focused on rights of EU nationals, a smooth Brexit transition and a commitment to on-going payment subsidies to the EU, following the UK’s transition to a single state entity.

The PM once again reiterated that the UK would not remain part of the single market or customs union, as the fallout continued following what has fast become one of the highest profile and messy divorces in the history of politics. Despite her positive, almost nostalgic undertone, it was interesting to note that she still believes that “no deal is better than a bad deal”.

Sterling momentum seems to have come to a fairly abrupt halt

The Pound’s value dropped quickly during her speech, with GBP falling back under 1.13 against the EUR. Despite a recovery late on Sunday night following German Chancellor Angela Merkel’s re-election (public voting indicated tough coalition talks await), investor confidence in the UK economy remains fragile. Whilst a more specific plan has been outlined, the markets and investors remain sceptical about how EU leaders will react and whether or not negotiations will actually progress from the current stand-off.

With the fourth round of Brexit negotiations getting under way today, investors focus will be on early market movements and as such any clients with a Sterling currency requirement should be monitoring developments closely as the week progresses.

Key economic data releases this week

Looking ahead and I am expecting a busy week for the Pound, with a host key data releases. We are also likely to see an on-going reaction to Theresa May’s address on Friday, so those clients with a Sterling currency requirement should be keeping a close eye on developments over the coming days.

Today we have the Financial Policy Committee’s (FPC) statement, which gives investors an insight into the stability of the UK economies financial system. The outcome of this could well be linked to comments made by May on Friday. However, with the current economic outlook for the short to medium-term looking fairly bleak, I wouldn’t anticipate a major increase in value for the Pound.

Tomorrow we have the latest Inflation Report Hearings. Again, this is likely to have a direct impact on Sterling’s value, due to the on-going concern regarding rising inflation in the UK. Whilst the figure remains well above the government’s target of 2%, expect further negative comments if figures haven’t dropped, this in turn is likely to handicap any major sustainable advances for GBP and as such any short-term spikes should be taken advantage of.

On Wednesday, the latest Gross Domestic Product (GDP) figures are released and this is possibly the most important of all the month’s data releases. This gives investors a key insight into the overall health of the UK economy and as such, can have a significant bearing on Sterling exchange rates. Expect additional volatility on the Pound if a figure outside of the previous 0.3% growth is released.

Finally, on Thursday Consumer Confidence figures are likely to be the main focus for clients holding Sterling. With so many key releases this week, it is essential that clients stay in contact with their personal broker here at Foreign Currency Direct, to ensure that no opportunities are missed and any market value is maximised.

For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me at mtv@currencies.co.uk.

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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.