Luke Trevail, a currency exchange specialist at forex brokers TorFX, looks at the factors driving the pound’s exchange rate this week.
We’re three months to the day since the great British public voted with a narrow majority to leave the European Union and go it alone into the wide world. With negotiations slow to start but the rumour mill churning up all kinds of warnings over Brexit we may not know what the future looks like but economically it’s hard to see the benefits of the outcome thus far.
Politicians are leaning more towards satisfying the Brexiteers who promoted the tightening of our borders and getting a better handle on UK immigration, regardless of the cost to the fragility of the emerging economy. A so called ‘Hard’ Brexit could mean that we no longer have access to single market and no guarantee that other major nations will want to strike a deal with the UK as the risk of upsetting the rest of Europe may not be in their interest.
The economic calendar has been blank for the UK this week, the pound is struggling to keep any of the gains that it has enjoyed so far in September. We’ve reached a fresh three and a half year low vs. Euro and the warnings of this moving lower really do need to be listened to. The appetite for the pound is creating a huge problem, with the Bank of England stating that an interest rate cut in November being likely then I think the next few weeks will create further uncertainty and poorer rates.
Understandably, people looking to buy the euro will be wanting a better rate, but depending on what time frame you are working on you may have to drastically change your expectations or look at budgeting strategy as sadly, this market cares little for sentiment and is at great risk of moving further downwards. Particularly as the referendum result is poured over and international negotiations begin to take place. Today Friday the pound was driven down sharply after U.K. Foreign Secretary Boris Johnson said he expects formal Brexit negotiations to start early next year.
If you’re lucky enough to have euros still in your pocket to move into GBP then clearly there’s a great opportunity to take advantage of where we are right now, but continued monitoring of the market may work out well for you.
I hope to have more news next week with further details of how the UK government negotiations are going, but don’t expect a miracle and please get in touch if you’d like to discuss your requirement.
This article is written by a foreign-currency broker working for TorFX, a forex broker established in 2004 to provide foreign exchange and international payments to both individuals and companies. TorFX is authorised by the Financial Conduct Authority under the Payment Service Regulations 2009 for the provision of payment services. Their FCA number is 517320. To verify their authorisation, you can visit the Financial Services Register and search the register using their FCA number. SPI is not responsible for the opinions of guest contributors.