The Pound has seen some noticeable weakness since the news of Brexit and here at Foreign Currency Direct we work to protect our clients from further losses in a volatile market.
It appears as though the Pound has taken the hit post-Brexit but as the dust begins to settle, more storms appear to be brewing in the distance.
The news is littered with political turmoil, not just for UK government but EU officials have voiced their concerns. Do the EU take the soft or hard approach to Brexit, how will the other EU bloc members react? More importantly, what financial impact will a Brexit have on the EU – losing the third largest net contributor?
There is of course the concern that other EU members will jump ship, is Brexit just the domino effect? Does the EU need to shift its focus away from further integration and return to what is was intended for, a trade bloc?
Outside of a very uncertain political arena, however, the UK economy is already beginning to rattle. On Thursday the Bank of England Monetary Policy committee will be meeting to vote on whether to enact an interest rate cut in the UK and/or to introduce a fresh programme of Quantitative Easing (QE) to the UK economy.
Seeing as the Bank of England (BoE) already relaxed lending controls in order to encourage continued buying activity in the UK, an interest cut seems a likely outcome to complement this move. Thursday could prove to be the next seriously volatile day on Sterling’s calendar.
There’s no doubt that the months ahead fill many with uncertainty, and the markets will react accordingly to future updates. With a market this reactive, discussing your options with one of our knowledgeable brokers who understands your requirements may be helpful.
Will the Pound strengthen or weaken? This all depends on what terms the two can come to, and until Article 50 is invoked, the uncertainty will likely continue. A forward contract could prevent you from further losses by locking in current exchange rates in the event the markets move against you. Speak to one of our brokers today to discuss your requirements.
An opportunity of a lifetime has presented itself in the fallout of Brexit, as the UK prepares for more uncertainty ahead, investment continues to pile into the safe-haven US Dollar. The last time USD/GBP exchange rates were this attractive, Margaret Thatcher was Prime Minister and Ronald Reagan was President of the United States. Opportunities like this don’t linger for long, especially under these very unusual circumstances.
In the last week cable exchange rates have fluctuated as much as 7 cents, this morning alone, Pound Sterling has already clawed back almost 2 cents.
The market continues to react to the political turmoil and Mark Carney’s post-Brexit economic warning, but these are just small cogs in a potentially much larger wheel.
But what is happening in the markets is purely a reaction to Brexit, and I’d like to point out that the markets were piling into the Pound hours before the Brexit outcome, the markets got it very wrong.
And if we start to look at the bigger picture, the US economic outlook has its own set of challenges to overcome. The Non-farm payroll figures in May dropped drastically from 123,000 to 38,000 although they did recover for June. Then, we have the interest rate hikes that look less and less likely to happen as we approach the second half of the year. Yellen’s meeting with congress last month should raise some alarm bells given her concerns over growth and lower than anticipated inflation.
And only last week, Deutsche Bank published a report indicating a 60% chance of a recession for the US based on yield curves, noting that some are at their flattest since 2007.
Call us today to find out more, you could be missing out on a once in a lifetime opportunity to sell US Dollars for Sterling.
With current levels at 1.71, how long could to be before rates fall to a 3-year low?
The elections in Australia were sure to create market volatility, although the results are yet to be concluded, Pound Sterling continues its downward trend against the Aussie Dollar. The current trend looks strikingly similar to that of 2009/2010 when rates fell steadily into the 1.50’s.
The rest of the World felt the brunt of the recession whilst China continued to build. If all else fails, will the Aussie Dollar take shelter under China again?
There are good reasons to continue investing in Australia which gives way to further Australian Dollar strength, their bond market is still highly attractive in a world of zero and negative yields, despite not having a safe-haven status, the Australian economy has experienced 25 years of uninterrupted growth, an economy that was almost resilient to the recession 8 years ago.
Investors would have priced in the odds of a rate-cut in August, therefore do not expect this to give much shelter for Sterling, if anything, a hold in rates could weigh further on the Pound.
With so much uncertainty for the UK, GBP/AUD exchange rates could well fall into the 1.60’s in the coming days and weeks. And with very little to cushion the fall, speak to one of our brokers today regarding a forward contract, to help protect you from any further losses.
To keep track of current exchange rates visit our live foreign exchange rates page. Alternatively you can contact us on 0044 1494 725353.
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