Brexit continues to hold back the Pound

Sterling has been on a continuous downward spiral since the UK election back in June. With the value of Sterling very closely linked to Brexit and the economic effects of the uncertainty the vote has created, any big improvement seems very difficult to forecast.

The below table shows the market movements for a number of GBP currency pairings in the last week:

Currency Pair% ChangeDifference on £200,000
GBP/USD1.39%$3,484 USD
GBP/EUR1.13%€2,580 EUR
GBP/AUD1.02%$4,336 AUD
the UK have had to give up a lot of ground to the EU in order to move talks forward

With any Brexit deals very far off in the future and continued uncertainty about what kind of deal the UK will actually get, markets are concerned and fearful. With the latest round of talks starting yesterday Michel Barnier warned about the lack of progress and clarity on the UK position.

A series of Brexit ‘papers’ published recently did attempt to lay out the Government position on a number of areas. However much like the recent series of talks there was an incoherent firm position on many areas. This has therefore failed to show the UK’s negotiating position or its currency in a positive light. Essentially the UK is refusing to commit to numbers on any leaving bill until it knows more about the deal it will get.

All the while this uncertainty continues, economic confidence of consumers and business continues to fade, piling yet further pressure on the economy. We came very close to touching the 168-year low (on a trade weighted index) hit last October during the ‘flash crash’. This measures the Pound against a basket of currencies and with those lows in sight, further weakness for the Pound cannot be ruled out.

Will the Pound see any sparks of life this week?

Nationwide released their latest House Price data this morning showing a -0.1% fall for August. Sterling is ever so slightly lower on the news, then this evening there is the BRC (British Retail Consortium) Price Index which might help the Pound. However representing Inflation in the shops it could easily be more bad news for the Pound. All in all these are fairly low tier releases which might not massively influence the rates.

With some global events over the weekend including Hurricane Harvey in the US and a North Korean missile fired over Japan, the Pound might be at the mercy of more global events this week. Big swings on the EUR/USD currency pair, which has been volatile yesterday owing to Hurricane Harvey could influence GBP/EUR and GBP/USD rates as they have in recent weeks.

Thursday is the end of August which can also see unexpected swings as traders close off positions ahead of a new month. Finally, Friday is the start of a new month with a whole host of new economic data for the Manufacturing sector. Despite the potential for some unexpected swings to help Sterling holders, further weakness for the Pound seems likely in the current market. If you are buying or selling make sure you are in contact with one of our expert team.

For further information on how economic data and upcoming events could affect your currency transfer 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.