It’s been an extremely tough few weeks for the UK Prime Minister and that has been reflected in sterling exchange rates. The Sterling report below covers the concern about a vote of no confidence being passed against Theresa May and how this uncerrtainty continues to impact Sterling. The table below shows the difference in a number of currencies you could have achieved when selling £200,000.00 during the high and low trading points during the last 30 days.
|Currency Pair||% Change||Difference on £200,000|
It’s been an extremely tough few weeks for the UK Prime Minister and that has been reflected in sterling exchange rates. Cable (GBPUSD) has now dropped below 1.30 and at a 10 month low and GBPEUR exchange rates currently sit at the lowest levels since late 2018 (accept 2 days in March).
The resignation of Brexit Secretary David Davis and Foreign Secretary Boris Johnson two weeks ago was the start of the PMs problems and many of my clients are asking whether a vote of no confidence against the Prime Minister is on the horizon and how that would impact sterling exchange rates?
So far we have had 3 Tory MPs publically announce that they have sent a vote of no confidence to Chairman of the backbench 1922 Committee Sir Graham Brady.
In order to start the motion of a vote of no confidence Sir Brady would need to receive 48 Tory letters. Furthermore Boris Johnson’s speech earlier in the week in the House of Commons arguably could urge more MPs that are unhappy with Theresa May’s Brexit plan since chequers to file a vote of no confidence. However I expect this is extremely unlikely.
A motion of no confidence against the Prime Minister would mean the Conservative party would need to find a majority of MPs to form a new Government within 14 calendar days. If this didn’t happen a general election would be called which could cause more problems for the UK. Nevertheless the thought of a vote of no confidence I believe is giving investors the jitters and the Pound has been sold off, which has made purchasing foreign currency more expensive.
In other Brexit related news, this morning the Government have announced that UK consumers, companies and holidaymakers will be given information weekly about a no deal Brexit scenario. Is this a bluff by the Prime Minister in order to help her negotiating powers? It certainly looks that way and the Pound has started on the back foot today.
The news came shortly after head EU negotiator Michel Barnier warned the UK that the chequers plan does not meet European principles and therefore further concessions will need to be made if the UK wants a deal with the EU.
With the Government breaking for their summer holidays on Tuesday, I expect Brexit related news will disappear for a short period, which will force investors to look at the next move from the Bank of England. Before the start of the week the market was predicting that there was a 75% chance of an interest rate hike in August. However this week UK inflation failed to rise to 2.6% which was forecasted by many leading forecasters and Retail sales numbers plummeted yesterday to -0.5%.
Regular readers will be aware that I have been pessimistic of an interest rate hike in August and I believe there is too much Brexit uncertainty for the Bank of England to think about raising interest rates and now that economic data has disappointed, this could be the Bank of England’s argument to hold off.
For clients that are buying a foreign currency in the short term, my opinion is that you should bite the bullet and trade sooner rather than later as I expect Brexit related news over the next quarter and the Bank of England not raising interest rates to continue to put pressure on the Pound.
However for clients buying Sterling I do believe the UK will secure a deal with the EU at some stage this year, which could strengthen the Pound significantly.
I recommend outlining your position to your account manager, so they can watch the market for you and this could end up saving you a significant amount of money over time. For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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