Investor confidence dips as the UK prepares for Brexit

Whilst there are still many unanswered questions, the consensus is that UK Prime Minister Theresa May will get her wish and our Brexit bill will be triggered this month as expected. Despite some speed bumps and amendments being made by the House of Lords to the original bill, none are expected to cause a major delay.

The markets are continuing to prepare themselves as we enter uncharted territory, as no country has left the EU before. As such we have no benchmark to compare with and investors will be questioning how our economy will fair in the months and years to come, once the UK goes it alone.

The best case scenario is that the government negotiate a favourable deal in terms of our exit, as we need to have some sort of relationship both in terms of trade and movement of person, even after the separation. Both sides are currently playing hardball and this is another reason the Pound is flagging. My hope is that as with most negotiation stand offs, both sides will relinquish some power at the 11th hour and a deal will be struck. This may help to rebuild investor confidence in the UK and the Pound will then have a better chance of a sustainable recovery if this is indeed the case.

As it stands though those clients holding the Pound should be looking for short-term market spikes, rather than gamble on longer-term gains in my opinion.

All eyes on today’s budget – How will this affect the Pound?

Moving forward and all eyes will now be focused on today’s budget by UK Chancellor Philip Hammond, with those clients holding Sterling particularly interested in how the market and the Pound reacts to developments. The noises being made indicate that UK growth forecasts will be raised form 1.4% to at least 1.6%, if not higher and this could well be of benefit to those clients holding Sterling. The Pound’s losses over recent days could reverse to some extent and although in the past the budget doesn’t have a significant effect, the overall picture may be of interest to investors at such an uncertain time.

We have also heard that the Chancellor will be setting aside a significant amount of funding to balance out our upcoming Brexit and to ensure we have sufficient protection should the UK economy react in a negative way following our exit. This news could again help breed investor confidence which is at a minimum, as it will give us some sort of guarantee should economic developments go against us.

Therefore we may find that the recent loses on Sterling are halted, at least in the short-term and today could provide a window of opportunity for those clients looking at a GBP transfer.

Key economic data for the week ahead

Looking ahead to the rest of the week and we have some key inflation data on Friday.

With inflation rising and a concern that it will exceed the government’s target of 2% this year, any major jumps in this sector will likely cause some market trepidation.

With costs rising due to the Pounds falling value over recent months, I believe inflation data over the coming quarter will have a significant impact on how Sterling performs and as such those clients holding the Pound should be monitoring Friday’s developments closely.

If you have any questions about exchange rates or transferring money overseas I would be more than happy to discuss them – you can contact me with any queries at mtv@currencies.co.uk.

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