Sterling is benefitting from the changing outlook on Brexit with the Government seemingly leaning towards a softer Brexit. But how might this and other factors affect GBP exchange rates in the week ahead?

The below table displays the movements for a number of Sterling currency pairings in the last month. If you would like to check current interbank rates please visit our live exchange rates page.

Currency Pair% ChangeDifference on £200,000
GBPEUR2.12%€4,189 EUR
GBPUSD3.41%$9,823 USD
GBPAUD3.58%$13,007 AUD
Theresa May speech on Friday the big news for Sterling

Friday's speech by Theresa May big news for Sterling

The Pound begins this week at slightly improved levels on the increased prospects of a softer Brexit which will see less disruption to the UK. Both Labour and Tory positions on Brexit are becoming clearer with Labour seeking membership of a customs union whilst the Tory‘s seek a more limited version of a similar arrangement. Theresa May has called it ‘managed divergence’, this position has already been discredited by the EU with Donald Tusk stating the UK's position is ‘based on pure illusion’.

Sterling is still benefiting from the news despite these obstacles and others raised over the weekend including the question of the Irish border and also Gibraltar where Spanish authorities are seeking greater control of ‘the rock’.

Theresa May is essentially going for Brexit ‘a la carte’ which has previously been ruled out by the EU.

Despite these challenges markets seem to believe a deal on transitional arrangements can be agreed for the 22nd and 23rd EU Summit. Will the Pound rise higher on this news is debatable since we have already had the news and seen the reaction from Sterling.

Is the good news on interest rates already priced in?

Interest rate expectations increased over the weekend too with Deputy Governor Ramsden signalling a shift to a more hawkish tone in an interview to the Sunday Times. Mark Carney is giving a speech on Friday too although this might not be centred on interest rate policy.

Whilst there is little key data today as we enter the new week, it will be interesting to see how markets react to the ongoing news surrounding the UK’s new Brexit position and look to Friday’s speech.

Should Theresa May outline a more focused leadership pursuing a softer Brexit, Sterling should find support and may well rise higher. However, clients hanging on hoping for Sterling to jump dramatically could end up disappointed. The Pound has already gained in recent weeks on this news and whilst the speech may be welcome there is still much ground to cover over Brexit.

Today sees Nationwide House Price data and the next big pieces of data are really Thursday and Friday when we have the latest PMI (Purchasing Manager’s Index) surveys for the Manufacturing and Construction Industry. Any clients buying and selling the Pound in the coming weeks should be monitoring the market very closely this week as developments on Brexit could set the pace for Sterling for the upcoming weeks.

For further updates on how upcoming events could affect Sterling exchange rates you can call our trading floor on 01494 725 353 or email me directly at jmw@currencies.co.uk.

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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.