Theresa May yesterday announced that she would be taking Britain out of the EU Single Market, announcing a plan for a ‘global’ Britain whilst seeking a bold and ambitious trade agreement with the bloc.
The speech was an eagerly awaited event, and didn’t disappoint. The speech was in effect the most detailed statement on Britain’s objectives before formal negotiations begin, scheduled for March.
I thought it would be best to recap the speech and break down what this means for our readers;
The Pound reached a session high of 2.9% against the USD, following PM May’s announcement that a final deal would be put before Parliament. The last time the pound gained 2.4% in a single session was back in October 2008. To put this into monetary terms, a client transferring £200,000 into USD yesterday would have received over $7000 more if traded at the high (after PM May’s speech) compared with the low.
Euro Buyers would have also been in a similar position following PM May’s speech, a well-timed transfer of £200,000 into Euro’s would have gained our clients over £4600.
Following yesterday’s speech I believe the investor sentiment has improved for the short term. As always with currency, it is impossible to say how long the pound will remain strong for. I think that as we have seen previously, the pound has the capability to suffer more than it could gain following our decision to leave the EU, therefore capitalising on any short term gains could be a wise move.
The Supreme Court ruling on whether triggering article 50, the formal process of leaving the EU, will have to go to parliament and therefore forces Theresa May to outline even more of her plans - is expected to be delivered later this month and as we have seen yesterday, any information regarding the UK’s plan to leave the EU has a heavy impact on the pound. If the Government allow Theresa May to bypass Parliament, we could see any gains made by the pound quickly reversed.
Important news for any clients with sterling – Nicola Sturgeon ‘2nd Scottish referendum undoubtedly closer’
Nicola Sturgeon stated that Theresa May’s plans to remove the UK from the single market completely has brought a second Scottish referendum closer. She thinks that Scotland will choose a different future to that of Theresa May. A referendum of this magnitude causing a breakup of the UK is likely to have detrimental effect of the Pound.
Data was by no means the focus of yesterday’s events, however it is worth noting that the Consumer Price Index, the measure of inflation within the UK rose 1.6% in December, as the fall in the pounds value since the Brexit starts to feed through into consumer prices. After a speech on Monday, Mark Carney, Governor of the Bank of England stated that the inflation would now have to be monitored. This sets the tone for further monetary interference from the BOE. In order to combat high inflation, the BOE may look at raising interest rates to encourage saving rather than spending. This normally strengthens the currency in question. The Monetary Policy Committee will now have until February 2nd before having to answer any questions.
There remains a huge amount of uncertainty around the UKs exit, and clients should not become complacent with the Pounds recent rally. Protecting your position now could save you thousands on a currency transfer, so please get in touch if youd like to learn more about the contract options available to you on 01494 725 353.
Amazing Customer service. Great spot rates & reliable transfers
Excellent service and very efficient and easy process.
I have used Foreign Currency Direct for many years and always helpful, polite and good rates according to the market. Easy transactions and seamless service