Why is the Pound rising – The Pound has continued to make against the Euro and US Dollar today, rising back towards 1 month highs. (Click here to view live graphs).
Sterling had a decent bounce last week due to a slightly more optimistic tone struck during talks that the Prime Minister held with his French and German counterparts. There wasn’t much detail to back up this optimism however. Ahead of the Bank Holiday weekend GBP/EUR had retreated back into the €1.09’s. Last week’s moves were largely due to optimism that perhaps a Brexit deal could be agreed after all.
While last week’s gains were due to a possible Brexit deal, today’s gains were more about avoiding a ‘No Deal’ Brexit. Since Boris became PM, he has put ‘No Deal’ firmly back on the table, hopeful that the EU would take the threat seriously enough to alter the Backstop and agree a new deal. This approach may or may not work, however many MPs don’t want the risk of leaving without a deal. So today Labour and others held meetings to try and avert a No Deal Brexit. This could take the form of a vote of no confidence, or more likely, passing legislation in order to force the PM to request another extension to Article 50.
Markets seem to like the thought of No Deal being removed entirely, and that’s why the Pound has pushed higher today. In reality, the EU aren’t likely to make any concessions while the chance of No Deal being removed anyway still exists. Trying to remove Boris, or force him to request an extension, could therefore hamper the negotiations and actually increase the chances of leaving with No Deal. So it’s quite a gamble that might have the opposite effect to what’s intended.
Anything that reduces the chances of leaving with No Deal will continue to help the Pound. Whether this is caused by MPs plotting to scupper Boris’ Brexit approach, or by said approach being successful in terms of getting a deal agreed, will both probably send the Pound higher still. However, there are still big risks the Pound could fall much further. Leaving without an agreement would cause significant uncertainty. Markets do not like uncertainty so this would probably send Sterling much lower.
If a vote of no confidence results in a general election, or if Boris decides to call one himself, then this could push the Pound either way. On the one hand, an election would generate uncertainty, and this could weaken the Pound. Markets don’t like the prospect of a Corbyn government, so this possibility could spook the markets.
However it could also be argued that an election could mean Brexit being delayed or scrapped entirely, both of which would probably send the Pound higher as it would remove much of the uncertainty that has been weighing Sterling down.
Another scenario is an election which Boris wins. Recent polling has suggested he could command a majority in parliament. This could also help the Pound, as it would remove many of the barriers that the Conservative party have faced in trying to get a Brexit deal agreed. With a large majority, they could push through a deal with little chance of it being blocked.
The next few months could throw up a number of possible scenarios, each of which could impact the value of the Pound in differing ways. For those that need to make a large transfer, these moves could cost (or save) you thousands of Pounds. To have a free consultation with a currency expert, contact us today or send me an email.
We can discuss your requirements, explain your options, and provide you all the necessary information to help you make an informed decision on what action to take and when to fix a rate. We can also provide you with a quotation to show what exchange rate we can offer you. (Typically our rates are 2% to 3% better than banks or other brokers may be able to offer, so the savings can be considerable.)
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Pound exchange rates have pushed to a one month high against a number of currencies to boost the GBP/EUR outlook.
The pounds rally has come about following comments made by French president Emmanuel Macron. Earlier today Prime Minister Boris Johnson met with Mr Macron in Paris for Brexit talks. During their meeting Mr Macron said the UK’s vote to quit the EU must be respected. But he added that the Ireland-Northern Ireland backstop plan was “indispensable”
This has led the market to believe the door maybe ajar for deal to be reached. PM Boris Johnson said that with “energy and creativity we can find a way forward”.
The main sticking point is the Irish backstop most had expected Mr Macron to point-blank refuse to renegotiate but this didn’t materialise. As a result the pound pushed from this mornings open of 1.0910 to peak at 1.1060 – the highest in a month. GBP/EUR outlook: A good buy opportunity?
Over the last two days, and following meetings with German Chancellor Angela Merkel and French Prime Minister, there seems to have been a slight olive branch dangled in front of Boris Johnson. As a result the market has interpreted this as being a chance a deal can be reached by the 31st October. I am still confident we will reach a deal and I can see the pound pushing on further. I hope to see some better opportunities for those exchanging GBP in the coming weeks.
If you need to convert a large sum, to purchase overseas for example, then get in touch to see how we can help. We offer a free consultation over the phone to discuss your requirements and explain the various options you can consider. We can also provide you with a free quote for you to compare with your bank or existing broker. Our rates are up to 5% better than available elsewhere, so you could save thousands.
Sterling exchange rate Forecast – As I’m sure all our regular readers will be aware, the Pound has not been faring well against the most commonly traded currencies, the Euro and US Dollar. Brexit uncertainty has been weakening the Pound since May. However, there are Sterling curreny pairs that are actually quite high, due to weakness in their respective currencies. In today’s post I’ll have a look at where your Pound goes further.
The GBP/TRY exchange rate is very good due to a weak Lira. 2 years ago, the rate was 4.4 Lira to the Pound, but today it’s 50% higher at 6.93. There are various reasons the Lira is so weak: Uneasy relations with the USA and political strains caused by US/China trade tensions, a deep recession and rising inflation, coupled with central bank intervention in the currency markets. The currency has now stabilised and down from the peak of almost 9 to the Pound, but still a very good proposition for UK Buyers.
The South African Rand has been weakening in recent years. Due to the global slowdown, there has been a sell-off for perceived ‘riskier’ assets, one of which is the South African Rand. China and Germany slowing have given investors the jitters and South African political and economic uncertainties, combined with global trade fears, have been weakening the ZAR for some time. The result of all of this is a GBP/ZAR rate 15% higher than 2 years ago.
The GBP/AUD is attractive, rising from $1.60 to $1.79 over the last few years. The reason the ‘Aussie’ is weaker and cheaper to buy is largely due to its close ties to China. Australia relies on the Chinese economy as they purchase much of their goods including Iron Ore, one of their main exports. As China slows, and tensions between the US and China increase, it has the knock-on effect of weakening the Aussie and making it cheaper to buy. This has caused the GBP/AUD to rise steadily on average for some years.
The New Zealand Dollar weakened recently following a 50-basis point cut in their interest rate. There is also speculation they will cut rates again to try and stimulate the economy. Lower interest rates tend to weaken a currency due to the lower return on offer. Much of New Zealand’s economy relies on its agricultural commodity trade with the rest of the world, and like Australia, has a significant exposure to the Chinese economy.
The GBP/HUF rate is 10% higher than 2 years ago, so Sterling goes much further in Hungary than other European destinations. They have an export led economy, and their main trading partners are in the EU, such as Germany. A dovish central bank seems to be happy with a weaker Forint as it helps exports and the economy. Hungary also receives billions of Euros in development aid from the EU, and if converted to HUF it will increase the amount received.
We can help anyone looking to convert currency on a bank to bank transfer basis. We don’t deal in cash or holiday money, but if you are buying property overseas, topping up a bank account, or a business that makes or receives payments in foreign currencies, it’s highly likely we can save you money.
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Sterling Recovers – The Pound has had a welcome boost over the last few days, rising from it’s 2-year low vs. the Euro. The catalyst for the recovery was inflation numbers yesterday that were higher than forecast. The key CPI reading came in at 2.1%. As this is above the Bank of England’s target of 2%, it would normally signal that an interest rate rise in on the cards. Higher interest rates tend to strengthen a currency due to the higher return on offer. However, with Brexit uncertainty still hanging over the UK, I don’t think we’ll see rates going up in the short term.
The Pound received a further boost this morning following the latest UK Retail Sales data. Markets had been expecting a contraction of -0.2%, however the actual number showed growth of +0.2%. Retail Sales are a very good barometer of the overall economy. These figures show that the underlying economy is doing ok despite the uncertainty caused by Brexit.
Jobs figures this week show that unemployment is still at record lows. Even the recent -0.2% GDP reading needs to be taken in context. Due to stockpiling in the expectation of a March EU exit date, coupled with car manufacturers bringing forward their summer shutdown, a slight contraction was not a surprise. Forecasts suggest GDP will return positive in the next quarter.
All of the above shows that the Pound is simply undervalued due to Brexit uncertainty, and is likely to remain so for some time.
If a Deal can be done with the EU, the Pound will surge higher in value. However, there is no impetus for the EU to negotiate while they think a No Deal Brexit will be blocked by parliament. Likely options to try and block this would be a vote of no confidence, a temporary government that can command a majority, or a general election. All of these options, including a No Deal, will probably send the Pound lower.
The only thing that could help Sterling is a deal being agreed with the EU before the end of October. Any extension to Brexit, or talk of an election, would simply increase uncertainty and kick the can further down the road. This would probably weaken the Pound further.
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