Currency Forecasts
Sterling vulnerable as PM resigns
Sterling exchange rates posted short term gains but have since fallen back to 1.13 against the Euro and 1.2670 versus the US dollar as Prime Minister Theresa May confirmed in an emotional speech that she will step down on the 7th June.
Post her resignation the fight will begin to hold the post at number 10 with staunch Brexiteer Boris Johnson the bookies favourite to take the top job. Of course there is no guarantee Mr Johnson will be voted in by the Conservative party but it leaves sterling vulnerable to a number of potential outcomes.
On Friday, Foreign Secretary Jeremy Hunt became the latest MP to say that he would run for the party leadership, joining Mr Johnson, Esther McVey and Rory Stewart, who had already confirmed their intentions to run for the top job.
What could happen to the pound?
Mrs May has faced a backlash from her MPs against her latest Brexit plan, which included concessions aimed at attracting cross-party support. This failed and therefore it appeared her only option was to resign. The issue hear could be the length of time it may take to vote in the new PM with the hope being one can be in place by the end July, before the summer recess. This will then leave just three months for the new PM to negotiate an acceptable deal before the 31st October deadline – is this enough time?
Sterling to me is very vulnerable particularly should a hard line Brexiteer come into power. This could mean another series of negotiations with little guarantee the EU will even contemplate a re-negotiation. This therefore leaves a real chance of a ‘no deal’ Brexit and most likely a significant loss in value for the pound.
Avoiding adverse exchange rate movements
Current sterling exchange rates are precariously placed and vulnerable to some significant downside losses, particularly if we leave the European Union without a deal. With this in mind, anyone purchasing property in the Eurozone or elsewhere in the coming months, should take steps to ensure that a sudden movement in the value of the Pound doesn’t increase the cost of your property unnecessarily.
A popular option is to freeze the rate using a Forward Contract. This is usually done when you have paid your deposit, and guarantees the price you will be paying in Pounds. A 10% deposit is required, and your rate is fixed for up to 2 years. Those less risk averse that want to take the chance of rates improving should Brexit be resolved, can use Stop Loss and Limit Orders. These instruct your broker to purchase your currency if it reaches a particular level, or starts to drop. This allows you to take advantage of any gains while not leaving yourself exposed to a sudden drop in the rate. These types of tools, along with exchange rates that are significantly better than your bank may offer, are why many people choose to take advantage of the services we can offer. On large transfers the saving usually run into thousands of Pounds.
To find out more about how we can help you save money on currency transfers, get in touch today.
Pound/Euro falls to 4 month low
Sterling has tumbled aginast the Euro and US Dollar overnight, following Theresa May’s speech outlining her changes to the withdrawal agreement and outlining her Brexit plan. As rumours swirled that she would announce a vote on a second referendum, the Pound initially gained, briefly reaching €1.1450 agianst the Euro. Once she had delivered her speech however, the Pound fell back. As it became clear that many still oppose the withdrawal agreement, the Pound fell further. This morning, the Pound is at a 4 month low against the Euro and US Dollar, with rates at €1.1350 and $1.2668 respectively.
Could the Pound fall further?
We think it could. It could be that the bill isn’t even voted on, with some expecting the PM to quit next Monday. If she doesn’t she could be forced out by MPs opposed to her deal. There doesn’t seem to be any will in Parliament for a second referendum, and if she steps down it’s likely we’ll see Boris Johnson as PM. Markets fear he will pursue a harder form of exiting the European Union, and it’s this uncertainty that is pulling the Pound lower and lower.
I actually think that if Boris does get the keys to number 10, we’ll probably see him backtrack on leaving without a deal. It gets the support of Eurosceptic MP’s but does not have the support of the wider Conservative party, or indeed other MPs in parliament. It’s more likely that he will become more moderate and try to re-negotiate a better deal with the EU, one that MPs might be able to support.
But all of that is a long way off, and in the meantime, we have political uncertainty. Markets do not like uncertainty and while things are unclear, the Pound could well come under further pressure in the short term.
Worried about exchange rates falling?
If you need to make a large international transfer, to purchase property overseas or to pay international invoices, then get in touch for a free consultation with one of our expert currency brokers. We can discuss your requirements, explain the options available, and provide you with a quote so you can compare our exchange rates with your bank or existing broker.
Typically our rates can be up to 2% to 3% better than available elsewhere, potentially saving you thousands of Pounds.
GBP/USD exchange rates fall below 1.27 – a 5 month low
GBP/USD exchange have tumbled to their lowest levels against the US dollar since January. We have now seen the pound fall just shy of 5% since the end of March and 3.9% in the last three weeks.
This movement can have a significant impact on the cost of a large money transfer overseas. A £250k exchange to US dollars would have bought you $12,500 more at the beginning of May when compared to the current levels.
What is causing the Pound to fall?
As my colleague Alastair alluded to in his post yesterday Brexit issues and cross party talks failing, it looks decreasingly likely that Prime Minister Theresa May will struggle to get her latest Brexit bill through the commons on the 3rd June. It is therefore likely she will stand down and a leadership contest will begin. With a high chance her replacement will be a staunch ‘Brexiteer’ a harder Brexit without a deal becomes increasingly more likely. To compound this the US dollar has also found support through its ‘safe haven’ tag – with on-going trade war tensions between the US and China, along with Brexit, it is likely the dollar will continue to benefit.
Need to buy or sell USD at the best exchange rates?
Even if you don’t need to make your transfer right now, we offer the option to freeze the current rate for a future date by lodging a 10% deposit. If you would like to have a chat about how we can help you with your currency requirements, contact us today.
Why is the Pound falling?
Sterling has started this week as it ended last week, dropping against the Euro and other currencies. This afternoon the GBP/EUR rate has dipped into the €1.13’s which is a fresh 3 month low. The graph below shows how the Pound/Euro rate has moved in the last 2 weeks, dropping 3% and adding around £8,000.00 to the cost of a €300k property overseas.
What’s causing the GBP/EUR rate to drop so quickly?
The main reason is, as I’m sure you will be aware, Brexit. Last week saw cross party talks collapse, and markets now await May’s latest attempt to get her deal voted through parliament in a few weeks. There is little expectation the deal will go through, having been voted down 3 times already. The Prime Minister said that the new vote will be a newer offer that has been improved, but any changes are likely to be cosmetic. We can expect Labour to vote against it, and as the parliamentary arithmatic hasn’t changed, the outcome is not likely to have done either.
So, with the deal expected to get defeated again, what next and how will it affect the Pound? If it is defeated, May’s time will be up, and now speculation is turning to who will replace her. The bookies have Boris Johnson as the favourite, and this is what is causing the Pound to fall. He is a well known supporter of Brexit, and if he were to become the next Prime Minister, it’s likely a harder exit without a deal becomes more likely. Markets are vey fearful of this due to the uncertainty and disruption it could cause, and the Pound is falling as a result.
The EU have also said that they will not re-negotiate their deal with any new leader, so the options are pretty much limited to a hard brexit, or a new referendum.
Worried about the Pound falling further?
The recent movements show how quickly exchange rates can change, and avoiding this is crucial when exposed to the currency markets e.g. when purchasing property overseas or paying international invoices. If you need the best Sterling exchange rates and are worried about the rate continuing to fall, get in touch today to discuss how we can help you avoid the rate moving against you and get a free quote.
Pound/Euro exchange rate falls below 1.15
Pound/Euro exchange rates have fallen below 1.15 today following news that Prime Minister Theresa May will be outlining her next steps for Brexit and taking her new plans to the vote in June. The vote – which will take place when MPs return from half-term recess – would bring the withdrawal agreement into UK law via the Withdrawal Agreement Bill.
In response to this news Labour party members were quick to state that they would vote against the the new plans as cross party tensions remain. As a result sterling exchange rates have fallen to their lowest levels against the single currency since February and fallen to nearly 1.28 against the US dollar. This all comes following news that UK unemployment had fallen to its lowest level in 45 years, just showing Brexit will dominate movement for the pound and highlighting how vulnerable the pound is.
How do you get the best exchange rate?
The first port of call for many clients that need to exchange currency is to approach their bank. Clients will often lose out by doing this, as bank rates are usually quite poor. By using the service of a specialist currency broker, you can often save in excess of 2 to 3%. When converting a large sum, this can save you thousands. When choosing a broker, ensure you are working with one that is fully authorised by the FCA. Registration usually takes a few minutes by completing a short online application. When the account is activated, you are then in a position to get a quote
I would recommend registering with two companies in order to guarantee you are getting the best price. There is very little point in registering with 4-5 companies, as by the time you call round and decide the best price, you may actually be in worse position than when you started as the market has moved! Many brokers will simply quote you the ‘mid-market’ rate, so make sure you are quoted an actual trading price. It might even be worth seeing if they can guarantee you a ‘fixed spread’. This way you will always know at what margin you will trade.
There are many benefits of using a broker other than just the exchange rate. By using a specialist currency broker, you gain access to multiple contract types. This can help safeguard your money transfer from adverse market movement. You will also find the process to be efficient and far less time-consuming than the banks.
Do you need to make a transfer?
If you’ve found this useful and would like to see what rate we can offer you get in touch here or email michael@currencyforecasts.co.uk
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