The Pound continues to slide with no further element of certainty. The BoE have taken the necessary measures to stabilise the economy but further Interest rate cuts could be on the cards.
Mark Carney has warned of a dip in commercial property investments which yesterday triggered a big slide in the value of sterling. Three UK property investment funds announced they were stopping investors withdrawing funds, the last time this occurred was during the banking crisis of 2007/8. It has been 13 days since the Brexit vote was confirmed and we have lost a Prime Minister, both main political parties are in leadership battles and as far as I can see we have no real economic plans on the table for the country moving forward.
Business and investors do not like uncertainty and at present the UK is clouded in it, personally I feel it will get worse before it gets better for the pound.
Sterling buyers and sellers need to familiarise themselves with Interest Rates and Quantitative Easing as the next big swings on the currency will, I believe, be determined by these economic concepts. Essentially known as ‘monetary easing’ the lowering of interest rates and expansion of ‘Quantitative Easing’ are measures taken by a central bank to stimulate economic growth and help manage the risks of an economic slowdown.
Interest rates look likely to be cut by 0.25% when the Bank of England meet next Thursday with some forecasters pencilling another cut in for August. Interest rates have been unchanged in the UK since March 2009, if they are cut this will mark a momentous occasion in the banks history and the message it sends to financial markets should not be underestimated.
Let us not forget it was political uncertainty that has taken us to this point and that there are numerous political question to be asked and answered, most of which will probably not be answered until we have a new Prime Minister. Article 50 of the Lisbon Treaty is the legal mechanism for leaving the EU but who will invoke Article 50? Will Article 50 even be invoked? What kind of deal will the UK strike? So far the EU have stated the UK will not get EU ‘a la carte’ where we can pick and choose what elements we wish to adhere. The new Conservative leader will not be elected until September 9th and every day this saga drags on confidence in the UK diminishes further, the economy struggles and sterling looks more vulnerable.
There is the prospect that sterling may stabilise or rise once we have further news on a new PM or once any trade deals are announced but if you are buying a currency with sterling and hoping for these events to lead to a quick turnaround of fortune you might be sorely mistaken. The last time the Bank of England cut interest rates and announced QE as mentioned above was 2008/09 which is when GBPEUR hit almost parity.
Politics will become the main focus again soon enough but for the next few weeks I think economics will become more important as Mark Carney and the Bank of England’s next movements are anticipated. Mark Carney has already made clear that his worst case forecasts pre Referendum are now his central forecasts which in my opinion does not bode well how sterling might react in the coming weeks and months.
It must be mentioned that Sterling has further potential for weakness with no timeline on certainty, making a transfer sooner rather than later could be worthwhile. Why not talk to one of our brokers on 01494 725 353 or firstname.lastname@example.org.
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