Good morning and a very Happy New Year to our readers. As we enter the first few days of 2019, the Pound has had a shaky start to the year. Over the Christmas period the currency markets were quiet with the GBP/EUR rate remaining around the €1.11 mark. However overnight figures from the BCC were releases show that UK services fall to the lowest in a few years at the end of last year. This has caused the Pound to fall by a cent overnight.
What is causing the Pound to drop?
It was expected that high street retailers and shops will have struggled over the Christmas period, so this wasn’t a surprise, but when you couple the latest Services figures it shows fresh signs of the economy slowing as we approach a key time in the UK/EU Brexit negotiations.
Business confidence and consumer confidence is low and this is reflected in the UK currency. Against the Euro, the Pound fell 1 cent overnight, touching €1.10 before recovering slightly to around €1.1038 at the time of writing.
The low jobless levels are also having the unexpected effect of companies struggling to hire staff. Exports are up however due to the weak Pound, and manufacturing is doing ok.
The main reason for the lack of confidence isn’t anything to do with a poorly performing economy, rather it’s the uncertainty over what is happening with Brexit. We’re no closer to knowing if the Withdrawal agreement will get through parliament in a few weeks. If not then we could still see a disorderly Brexit, and it’s this uncertainty that is keeping confidence low, and Sterling along with it.
Brexit still the key driver for GBP exchange rates
Businesses have no idea what trading conditions will look like in a few months when the date to leave the EU is here. If the withdrawal agreement gets through, then it provides the clarity that the markets are looking for, and it’s likely the Pound could rise significantly. If however no progress is made and the EU don’t make concessions, then the uncertainty surrounding the UK will remain, and the Pound is likely to fall.
Much then depends on what happens in a few weeks when parliament will vote on the deal. If they even do; it could still be delayed further if it’s looking like it still won’t get through.
Do you have a currency exchange requirement in 2019?
If you need to exchange currency in the coming weeks and months, then the uncertain times as we are experiencing at the moment make it more important than ever to speak to a currency expert to ensure you get the best rate, contract type, and time things correctly.
We offer exceptional rates of exchange, free consultations with expert brokers, and a range of contract types to help protect you against any adverse movements in the currency markets. Get in touch today to find out how we can help you.