The Pound has started the week poorly, falling this morning after worse than expected manufacturing data. Sterling has fallen by almost 1 cent against the US Dollar to the mid $1.28’s, and against the Euro it has fallen 0.6% against the Euro, falling back into the €1.10’s.
Even without this morning’s manufacturing numbers, it was probable that the Pound would fall. Last week we saw some renewed optimism surrounding Brexit negotiations, when EU negotiator Michel Barnier said that the UK would be offered an unprecedented deal “such as there has never been with any other third country”. These comments sent the Pound higher last week.
However over the weekend, Barnier stated once again that there could be no cherry picking, indicating that perhaps no progress has been made after all. I can’t see any real negotiating coming from the EU and I fear that this unwillingness to make concessions could mean the UK leaving with no deal, and this would not be favourable for the Pound.
Will the Pound go up or down this month?
The next month or two will be very important for which direction the Pound takes next. Personally I’m expecting a very volatile time, with some significant movement for Sterling. Even if the EU accepted the current proposals, I can’t see how it would be voted through the commons. May has taken a position in the middle of the road, which is a very dangerous place to be, as you can be hit from traffic in both directions. Boris is also trying to position himself, and while the Conservatives are bickering between themselves, the clock is ticking every closer to a ‘No Deal’ scenario.
If Barnier flatly rejects May’s latest ‘chequers plan’, then the Pound will drop sharply. The issue is that they keep rejecting our proposals, without coming up with any alternatives, instead stating that the UK chose to leave, so the UK has to come up with a plan. This has been going on for months and months, and time is running out quickly. And this is happening against the UK political backdrop – parliament is returning after the summer break, and MP’s seem intent on arguing amongst themselves rather than getting together to get the best deal and act in the best interests of the British people.
Quite simply, if the markets think that a deal will be made, it’s likely the Pound will go up. Anything that indicates that a deal is unlikely, will send the Pound down.
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