This update briefly discusses how Sterling got to this point and looks at factors that could affect GBP exchange rates this week. The table below shows the movements for a number of currency pairings yesterday:
|Currency Pair||% Change||Difference on £200,000|
Sterling is under pressure against most of the major currencies due to both political uncertainty and lack of information on the UK’s stance on Brexit. The situation with the Pound is a poor one and I think it could have been avoided if it were not for politicians with their own agendas. Firstly there was David Cameron throwing down the gauntlet to Brussels by holding a referendum. His confidence on a remain vote backfired when the UK chose to leave. Boris Johnson being a catalyst by joining Nigel Farage in campaigning to leave. We then have Theresa May calling a general election when she had a significant lead in the hope of winning an easy victory. This became a debacle when she attacked her core voters and failed to win a majority victory.
We then have fifteen members of the Conservative party putting forward a vote of no confidence in Theresa May continuing in her position. Political uncertainty weakens the currency in question and until we have a stable government Sterling stands little chance of any significant rally. Let us hope those in power start putting the country first rather than their own political agendas.
The uncertainty surrounding Brexit negotiations is another reason for the drop in the Pound. The release of the latest Brexit white papers could potentially cause Sterling to strengthen. If there is one thing the markets do not react well to it is uncertainty. No news is worse than bad news in the currency market. If the white papers gives some indication as to the UK’s stance on Brexit I would expect a small rally for Sterling.
It is hard to find much basis for Sterling to make significant gains considering the situation we are in. Morgan Stanley, JP Morgan and Citibank are all predicting parity on GBP/EUR in 2018.
If you are selling Sterling in the short to medium term it may be wise to take advantage of current levels.
GDP is considered to be the broadest measure of UK economic health and can cause volatility on the exchange. There is expected to be little movement but if data comes in below expectations expect the Pound to suffer.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me at firstname.lastname@example.org.
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