Following some Sterling weakness after poor trade deficit and industrial data releases last week, this update examines factors that could affect GBP exchange rates in the coming days. The table below shows the market movements for a number of GBP currency pairings during the last month:

Currency Pair% ChangeDifference on £200,000
GBPAUD4.53%AUD $15,460

The Pound weakened against its major currency counterparts at the end of last week, after the UK received a host of disappointing economic data on Friday. Trade balance figures were released and showed that the difference between the UK’s imported and exported goods had risen to £13.6 billion in December, which was far higher than had been expected. A wider trade deficit is viewed as negative for the economy in question, when goods imported into the country exceeds the value of goods exported. A rise in the price of oil was a large contributing factor to this increase.

Widening of the trade balance has been put down to a rise in the cost of imports

A separate report also showed that industrial production fell by 1.3% in December compared to the previous month, which was the largest fall noted since 2012.

However, a positive point to note is that the Manufacturing sector saw its eighth consecutive month of growth at 0.3%. UK Growth estimates for January also came in better than expected, although slightly below the previous month’s figures.

However, much of Sterling’s weakness was due to EU Negotiator Michel Barnier’s warnings on Friday that a post Brexit transitional agreement is ‘not a given’. He said that the UK and EU are struggling to agree on certain points which are jeopardising the March deadline agreed, intended to provide businesses and the public with more clarity on life after Brexit.

The sticking points for the UK's Brexit negotiators include providing lifetime rights of residency to EU citizens who arrive after Brexit but before 2021, and having to abide by new EU laws put in place, which the UK would not have been able to negotiate or disagree on.

On Tuesday morning the latest Inflation data will be released, and are expected to show a fall from 3% to 2.9% in January. If these figures are any worse than expected, we could see GBP/EUR fall further into the 1.11’s.

How will ‘Road to Brexit’ speeches impact GBP rates?

With Brexit negotiations continuing this week, and Boris Johnson set to speak on Wednesday, beginning a series of speeches outlining ‘the road to Brexit’ over the next few weeks, clients should expect further volatility for Sterling exchange rates. Over the last week alone the Pound has fluctuated by almost 2% against the Euro and 2.7% against the US Dollar, making a £200,000 transfer €4,300 and $7,500 more expensive respectively, and highlights the importance of keeping in close contact with your broker at this volatile time.

For updates on how future data releases could affect Sterling exchange rates, call our trading floor on 01494 725 353.


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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.