The news that Theresa May will become the new Prime Minister lends some hope to the Brexit uncertainty. Its yet to be seen if the Bank of England will cut Interest rates on Thursday although its likely the market have priced one in.

Investor confidence for GBP grows once again

Andrea Leadsom pulled out of the race to become the next Prime Minister yesterday, claiming that the country requires a strong and well-supported leader, leaving Theresa May as the only remaining candidate. Before she can become Prime Minister, David Cameron must first formally tender his resignation to the Queen and put forward his suggestion as to who would be best suited to command the confidence of the House of Commons. The handover will happen tomorrow afternoon and Britain will have a new Prime Minister by tomorrow evening.

Sterling gained by almost a cent against the Euro following the news, as some of the post-Brexit uncertainty is removed and we can now begin to understand the path for Britain moving forward. Chancellor George Osbourne also added to the positivity yesterday, after vowing to make Britain “more outward-looking and global-facing” following from the decision to leave the EU. He will be meeting major investors across the globe over the coming weeks, and will be focusing on forging stronger economic ties with the US. The UK is the largest US trading partner, and the US is the largest UK exports destination, so there is already good reason to continue working together in making Britain a highly desirable trade partner.

Will the UK cut Interest Rates on Thursday?

Key data releases this week include GBP Inflation Report this morning at 10am, which sets out Inflation projections and a detailed analysis of the current economic situation. This is key for the nine-member Money Policy Committee to base their Interest Rate decisions on and could give us an insight into whether the Bank of England are likely to change interest rates at their next decision meeting on Thursday.

I am of the opinion that, as it was only two weeks ago that the UK voted to leave the EU, and with a brand new Prime Minister waiting in the wings, it could be too soon for a cut in Interest Rates from its record low of 0.5%. However if a rate cut is decided, or if the MPC give any hints to a rate cut in the near future, we could see GBP/EUR rates fall lower, potentially below 1.15, and any clients looking to buy Euros with Sterling should keep in touch with their Account Manager here to keep up to speed with any developments which could impact their purchase.

With news surrounding Brexit occurring daily, the markets will likely adjust to these announcements creating volatility. If you are unsure as to when to make a currency transfer, speak to one of our brokers today on 01494 725 353.


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