Over the last 30 days UK economic has exceeded expectation. Gross Domestic Product (GDP) for the quarter increased to 0.5% from 0.2%, Industrial production/manufacturing for March exceeded expectation, inflation rose from 1.9% to 2.1% and unemployment levels remain at record lows. However, this hasn’t been reflected in sterling exchange rates and in fact the pound has lost 5 cents against both the US dollar and euro over the last 4 weeks.
|Currency Pair||% Change (Month)||Difference on £200,000|
The ongoing Brexit saga is the main reason why the pound has declined so rapidly. It appears that in the run up to and since Theresa May’s announcement to depart as Prime Minister the chances of the UK crashing out of the EU has increased which is putting pressure on sterling.
Looking ahead the Conservative Party will want to come up with a way to break the deadlock in Parliament. Since Donald Tusk told the UK not to waste time at the end of March when the UK were supposed to leave the EU, nothing has really changed other than there will be a new leader in the weeks to come. Furthermore, the future direction of the pound could be linked to who takes control of No10. If a Brexiteer like Boris Johnson gets into power, on his own he won’t be able to crash the UK of the EU however his approach will be a lot different than that of Theresa May’s and therefore the pound could face further pressure in the weeks and months to come.
On a slightly more positive note, US President Donald Trump on his visit to the UK yesterday announced that he is committed to a “phenomenal trade deal between the UK and US” and that Brexit will happen at some stage. However, the positive comments from the President failed to provide the pound a boost in value.
It’s a quiet finish to the week for UK economic data releases however the key release to look out for is the Markit Services data released this morning. A slight rise is expected which may provide a small boost for the pound.
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