This Sterling report looks at the factors and events that could affect GBP exchange rates in the short term. The below table shows the market movements for a number of currency pairings in the last month:

Currency Pair% ChangeDifference on £200,000
GBPEUR2.44%€5840
GBPUSD2.26%$6040
GBPCAD2.90%CAD $9820
UK Manufacturing Purchasers Managers Index: A strong finish for the year for the UK economy

UK Manufacturing Purchasers Managers Index: A strong finish to 2017 for the UK economy

Last month’s manufacturing PMI data revealed a positive picture for the sector which currently accounts for around 10% of the UK economy. Even though the figure moved down to 56.3 from 58.2 the previous month, this strong reading of above 50 still signals expansion within the sector and will be a welcome boost for investors. What is even more promising is the amount of new orders the managers reported, with most firms citing a backlog of orders from last year. This will increase prospects for the reading to remain strong in 2018 and could be a boost for the Pound in the months to come.

In my opinion, the biggest driver of Sterling rates this week will be the services purchaser’s managers index report released tomorrow.

The services sector contributes the largest amount of UK economic activity. A small rise is expected from the reading, any clients with a Sterling based requirement may want to speak to us here to find out how it could affect your trade.

Sterling awaits Brexit talks

The Pound has been fairly subdued over Christmas and this is likely to continue until Brexit talks resume, which is expected to be sometime later this month. The next focus is a potential trade agreement with the EU and is likely to cause volatility for Sterling. At present the markets and investors are unsure of which way the talks are likely to go, which can be seen in the large range of rates on both GBPEUR and GBPUSD for the year.

Currently, I personally think there are two scenarios for the UK and I will explain how this is likely to affect Sterling;

1) 2-year transitional deal is quickly concluded

With the UK just under a year away from the cut off point until we are set to leave the EU, and agreement on a two-year transitional deal where the UK adopt the laws and policies of trade under the EU is likely to help strengthen sterling considerably.

2) An early 2-year transitional deal isn’t concluded

There is no reason to state that the EU are going to make things easy for the UK to leave the EU. With countries such as Italy threatening this recently, the EU could make this as difficult as possible for the UK so that other members of the bloc don’t follow suit. This is likely to drive Sterling’s value down dramatically in my opinion.

With so much uncertainty of how things will progress, if you have a Sterling based requirement speaking to us to gain insight from an account broker kept up to date daily regarding Brexit negotiations is extremely worthwhile in my opinion.

For more information on how future data releases could affect 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.