Today PM Theresa May will approach senior Brexit Ministers with a new proposal for the Irish border, called the 'backstop plan' in which the UK would avoid a hard border with the EU by matching EU tariffs if agreement on the Irish border isn't reached by October. The report below discusses the potential ramifications of this new development. The table below shows the difference in a number of currencies you could have achieved when buying £200,00.00 at the high and low points during the last 30 days.
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Today Theresa May plans to meet senior Brexit ministers to discuss the ‘backstop plan’ set out by the Government. The proposal is that if the UK and EU cannot come to an agreement in regards to the Irish border by October, the UK will continue to match EU tariffs which will therefore avoid a hard border. In other words the UK will remain part of the customs union for an extended period of time. Reports are suggesting Brexit Secretary David Davis doesn’t support the plans therefore today’s meeting could be tricky for the PM and any negative commentary could cause problems for sterling exchange rates.
Jeremy Corbyn the leader of the opposition has surprised the markets this week when he announced that the Labour party is committed to retaining full access to the single market and therefore the ‘softest’ Brexit deal possible. Furthermore reports are suggesting that next week the Labour party plan to put this forward to the Commons, putting further pressure on the UK Prime Minister Theresa May.
However the Labour party have confirmed that they do not want to become a member of the European Economic Area (EAA) as this would mean the UK would have to continue with the free movement of people which goes against the policy set out by the party.
The EAA is a hot topic at present as rewind the clock to last month this proposal was backed by the House of Lords, when changes to the withdrawal bill were made. As described in the market report yesterday, MPs will meet on the 12th June to discuss the amendments made by the Lords and this could therefore be a volatile time for sterling exchange rates.
It’s a key month for Brexit negotiations and it appears that it’s been a tough start to June for the Prime Minister. The PM promised to release a white paper outlining the UKs position before the EU summit at the end of the month, but a spokesman for the PM refused to confirm that the whitepaper would be released before the summit. This is a significant U turn, and reports are suggesting the reasoning is because of the complete split within the Conservative party. My personal opinion is that the white paper has the potential to have a major influence on exchange rates, as investors will second guess the outcome of the summit based on the UKs position.
Nevertheless if it’s not released before the summit speculators will second guess that the PM is still unclear in regards to what she is actually trying to achieve. I find it hard to see how the pound will gain any momentum and actually expect the pound to lose value towards the back end of the month.
For clients that have paid deposits on properties abroad and need to pay the full balance in the upcoming months, there is a strong argument to buy your currency upfront. If you do not have the full amount of sterling available an option is to use a forward contract which allows you to buy now, pay later. For more information feel free to contact the trading floor.
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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