Sterling exchange rates have continued to slump bringing the pounds losses to nearly 3% in just under a week. This is a significant move and continues to show how vulnerable the pound is. In the same period the pound has also seen significant losses against other major currencies falling 2% against the US dollar and 2.5% against the Australian Dollar.
These losses highlight how volatile the market is and until we get a clearer picture with regards to Brexit we are likely to see continued volatility for the pound. We now find GBP/EUR back in the 1.12/1.13 range but I do feel the risk to the pound is very much to the downside. The average trade price over the last year sis roughly around the 1.1250 mark, so actually the current levels, for bot buyers and sellers, aren’t actually that bad. In this time the lowest recorded rate was 1.1006 – a rate which I feel could be tested in the coming weeks.
Of course Brexit will continue to dominate the market for the foreseeable and with uncertainty surrounding Prime Minister Theresa May’s tenure it is difficult to see anything other than sterling losses in the coming weeks. There will, of course, be other data sets to focus on that could impact the pound and below I have outlined the main releases for the remainder of this week.
Tuesday 20th – Today is light for European data but we have a speech from Bank of England Governor Mark Carney at 10:00. Nothing expected but worth keeping an eye on for any insight as to future monetary policy the central bank may have in store. We will also have the release of the inflation report hearings at 10:00.
Wednesday 21st – At 09:30 we have UK public sector net borrowing figures, this being the only UK release. The rest of the day is dominated with US data the most notable being mortgage applications and initial jobless claims at 13:30
Thursday 22nd – today is a very quiet day with it being thanksgiving in the US although the European Central Bank will release their overview of the financial market, economic and monetary developments through their policy meeting accounts report, this is at 12:30. Following this look out for European consumer confidence at 15:00
Friday 23rd – Today is busy with European data starting with German GDP data at 07:00 followed by Markit Manufacturing and services data at 09:00. There is no data of note from the UK and this afternoon will also see Markit manufacturing and services data but this time from the US.
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As I’m sure all our readers will know, the last 24 hours have been extremely influential for Sterling exchange rates. Initially it seemed that the draft Brexit agreement would be agreed by the Cabinet, and GBP/EUR rates were as high as €1.1550. Much can change in 24 hours however, and at the time of writing, Sterling has weakened by over 2%, dropping to €1.1260 against the Euro and $1.2787 vs. the US Dollar.
Another reason for the drop is a strengthening Euro, on news that the European Central Bank will soon be ending their stimulus measures.
I think there could be more trouble in store for the Pound if Theresa May faces a vote of no confidence. I mentioned earlier in the week that if the cabinet did not agree the deal, it would open a Pandora’s box of uncertainty, and that’s what is currently happening. Will the deal get voted through parliament? Will May survive as leader? Who would replace her? What would that mean? All of this uncertainty is likely to keep pressure on the Pound.
There is even the chance that we could end up leaving the EU with no deal, in which case the Pound could collapse.
The key objections to the draft agreement are the fact that the ECJ retain more control that had been envisioned, and the wording of the customs union. This is key. In effect it is saying that there is a backstop that means the UK will be in a customs arrangement indefinitely. Being permanently tied to EU trade rules mean we would be unable to strike trade deals elsewhere, arguably the key benefit of leaving the EU. Furthermore, the draft states that this UK wide customs union would form the basis of any future trade deal. This understandably is not acceptable.
Expect further volatility today and possibly more resignations. If you need to convert currency, you need to take action to remove your exposure to the currency markets, which are at their most volatile in a few years.
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Yet again the on going Brexit saga has flattered to deceive and, although Prime Minister Theresa May was able to pass her latest Brexit draft through her cabinet, the pound has once again fallen sharply from the highs of 1.1550 on Tuesday. It would appear a growing number of politicians are showing little support for this agreement.
A very detailed timeline for the next steps in the Brexit saga can be found here. You will see there is still some way to go for Theresa May and this is far from a done deal. There is a real chance these plans will be rejected by parliament in December, potentially leaving Mrs May’s position as untenable and some significant volatility for the pound will ensue.
In breaking news Brexit secretary Dominic Raab has resigned causing a significant shift down for the pound. We have now seen sterling fall nearly 1% overnight, this is a worrying trend and those who were hoping for a strong start for the pound will be bitterly disapointed. More to follow…..
It’s been a rollercoaster ride for the Pound today. Taking GBP/EUR as an example, we have seen rates between €1.1440 and €1.1540, and right now we’re right at the bottom of that range.
The reason the Pound has fallen is that Theresa May will not now make a statement about Brexit. To me this indicates that the Cabinet are not in agreement. All afternoon May has been trying to sell the plan to the cabinet, but it does not appear to be going well.
It’s mostly all speculation at the moment and there are no hard facts. That’s why Sterling has been all over the place today, reacting to any snippets of news. We might here from May later tonight but I think it’s more likely we’ll see a statement in the commons tomorrow.
Perhaps she will make a statement once the cabinet meeting has finished, at the moment we’re hearing conflicted reports, and all day the markets have been trying to second guess what will happen, and that’s caused quite a bit of volatility for the Pound.
In terms of what this means for the Pound, nothing has changed. If the deal is agreed, expect the Pound to rise. If the cabinet do not agree, expect the Pound to plummet. In the meantime, GBP/EUR is likely to continue bouncing in its range between €1.1450 and €1.1550.
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Pound exchange rates have pushed through the 1.15 level to reach the highest level since April. This has now seen the pound rally 3% since the end of October, a difference of £8k on a €300k money transfer. This comes as Theresa May is to chair a special cabinet meeting on Wednesday to discuss a draft Brexit withdrawal agreement. Sources report that the text has been agreed at a technical level by officials from both sides after intensive talks this week.
This all sounds a little bit like the ‘boy who cried wolf’ at the moment with continued rumours creating significant shifts for the pound. Once again this shift has been created by rumour as opposed to hard facts. We have seen this on a number of occasions over the last few weeks and on each occasion the rumours were unsubstantiated. My feeling is that, in this instance, a deal is close. The BBC’s chief political correspondent Vicki Young said individual cabinet ministers were likely to be shown the full draft text this evening as a prelude to a full meeting on Wednesday afternoon. If a deal can be struck then I would look for the pound to push towards 1.18 in the coming days……..euro buyers watch this space.
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