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 you would have received when buying £200,000.00 for a number of currencies for the past month.
|Currency Pair||% Change||Difference on £200,000|
Sterling exchange rates have gained slightly over the last fortnight reaching multi week highs against both the EURO and the USD. This however I believe to be more down to USD and EURO weakness rather than any GBP strength. Economic data from Europe showed some weakness this week along with the recent storms hitting the Americas weakening the USD.
The Pound remains very much under pressure as economic data continues to show the impact of the uncertainty for the future of the UK as a result of Brexit. Consumer spending slowed in the face of higher inflation. The second quarter growth figures for the UK came in at 0.3%, making the UK the slowest growing economy in the G7.
The only recent positive information from the UK was Theresa May confirming she wants to stay in power for the long term, quashing concerns that after a failed snap election earlier this year she may resign. Mrs May’s ratings are down from 43% to 34%, her lowest since becoming Prime Minister. However, saying that, who would want that poisoned chalice?
With the return to work recently for most governments and the Brexit talks taking centre stage once more the risks that have been mentioned about parity against the EURO have returned.
The UK government has published a number of ‘Brexit position papers’, including ones on Northern Ireland, citizens’ rights and the jurisdiction of the European Court of Justice. These seem to be part of the negotiations with Brussels to try and find a path forward in what is becoming a very public power display.
We are yet to get confirmation on the potential ‘divorce bill’ for the UK leaving, and this I believe to be one of the biggest driving factors on the value of the GBPEUR rate in the near term from these talks.
The media suggests this figure could be as high as £100 billion however most financial institutes expect a figure closer to £60 billion. As we get closer to this potential decision in the weeks ahead expect the Pound to weaken however any figure below this could easily give Sterling a boost in value.
Within the next 7 days we have a number of key economic data releases for the UK due. This includes inflation data later today, production figures on Tuesday, Unemployment on Wednesday, the Bank of England Interest rate decision on Thursday and a quarterly update next Friday.
Through August this period confirmed some series contractions in economic activity in the UK resulting in the GBPEUR rate falling by nearly 2.5%.
I personally would not be surprised if we see a similar fall, especially when a majority of this data is for the period of August, typically a quiet time of year due to the holiday session.
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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