The Pound rallied on the news of Theresa May becoming the new Prime Minister, she will likely be sworn into office today. Its unclear as to whether the Bank of England will cut Interest rates on Thursday, but it could cause Sterling weakness.
It is expected that Theresa May will be sworn in as Prime Minister of the United Kingdom today following David Cameron’s resignation to the Queen. Theresa May’s credentials bode well for her new role. She worked at the Bank of England for six years before becoming an MP for Maidenhead. She then went on to take the role of Home Secretary in 2010 and has the longest tenure ever in this position.
We have seen Sterling strengthen on this news of May’s pending appointment. GBP/EUR has moved above 1.20. With a Prime Minister in place, I think there is a chance of a gradual Sterling rally against the majority of major currencies.
The Pound’s rally may well be cut short however with the possibility of a rate cut tomorrow. Mark Carney the governor of the Bank of England (BOE) has indicated there is the possibility of a rate cut if not tomorrow then there is the strong chance it could occur in August. UK interest rates are already at a record low of 0.5%, the general consensus is that there will be a drop to 0.25%. Carney also indicated there is £150bn available for quantitative easing (QE).
For those of you not aware QE is an unconventional form of monetary policy where a central bank creates new money electronically to buy financial assets, like government bonds. This process aims to directly increase private sector spending and return inflation to target. QE generally weakens the currency in question.
Due to the probability of a rate cut being common knowledge this could well be factored into the markets, so do not expect a massive fall in Sterling value if a cut occurs. But, If you have a trade to perform short term where you are selling Sterling it still could be wise to play it safe and move before the decision later today.
During these volatile times it is vital to stay in touch with a seasoned broker to be your eye and ears in the market. Timing your trade is essential to gaining the maximum return on your transfer. Please do not hesitate to get in touch if you require our assistance.
Call us today on 01494 725 353 and talk to one of our brokers today about your currency needs, we are open until 6pm.