The Pound found some support during Tuesday’s trading but has failed to fully recover its losses from Friday. Here you will find more commentary surrounding Brexit and its impact on Sterling; the table below shows the difference between the high and low for a number of currency pairings during the past month.
|Currency Pair||% Change||Difference on £200,000|
Reports late yesterday afternoon on Reuters indicated that the EU were prepared to offer the UK a free trade deal but were still set to reject the PM’s Chequers proposal. This news, if substantiated, could help to alleviate some of the pressure that has been building on Sterling since Theresa May’s speech on Friday.
Her comments have since been well documented, where she ultimately dampened the growing expectation that a Brexit deal with the EU was close to be agreed upon. The Pound immediately saw its value diminish against both the EUR and USD, as investors sold off their GBP currency positions in haste.
It could be argued that this was a last ditch attempt by the PM to keep an element of control over a situation, in which the EU seemingly hold all the trump cards.
Whilst yesterday’s report may bring some hope that this endless stage could yet have a satisfactory conclusion, even this was cloaked with facets of uncertainty.
The report acquired by Reuters claimed that any cross-border supply chain could not operate seamlessly. This leaves any potential offer and its merits open for interpretation and as such, I cannot see the markets reacting overly positively to more rumours.
The repercussions of potential no-deal are yet to be fully understood or comprehended.
We do know that the Government have published a series of papers on how businesses should start to prepare for a no-deal scenario with the EU, but in truth, there are far-ranging consequences that could potentially handicap Sterling’s value over months, if not years to come.
For this reason, I am still hopeful and perhaps even too optimistic, that deal will be reached.
However, whilst the other side of the coin looms like a dark cloud over the UK and its future economic standing, those clients holding the Pound are leaving themselves potentially very exposed.
Whilst there is little economic data of note for the rest of the week, the UK Manufacturing sector is already feeling the pinch. Exports dropped to their lowest levels in almost a year, due to “heightened fears” of a no-deal.
Whether this scenario ultimately ends up coming to fruition, it is likely to be debated furiously over the coming weeks.
Therefore, I expect market sentiment surrounding Brexit talks and their ultimate outcome to continue to drive Sterling’s value as we head towards what could be a seismic and certainly unpredictable conclusion.
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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