Luke Trevail, a currency exchange specialist at forex brokers TorFX, looks at the factors driving the pound’s exchange rate in the week gone by.
Well, that was the week that was. Two important questions were answered this week;
First, the UK has a new Prime Minister after Theresa May entered number 10 on Wednesday and quickly got to work in appointing a new Cabinet to oversee her premiership and guide Britain through the post-Brexit era. May has pledged that she will ‘build a better Britain’ and so far, the market has liked the sentiment and has been calmed by the mere fact that our rudderless ship at least has a captain for now. Boris as Foreign Secretary? We’ll have to wait and see if it’s first day nerves or a touch of genius by Mrs May. For all that Johnson is, he will grab headlines and get people’s attention. Will this enable Britain to get through the door and strike trade agreements for all of the countries outside the EU? Perhaps it will.
Secondly, the Bank of England was very much in the news on Thursday with the market 80% sure that they would cut rates to help boost the economy post the referendum result. This would have punched the pounds whilst already on bended knee. In a surprise move, they kept rates on hold and Sterling reacted positively, moving up nearly 2 cents on the day. The move has been tempered by the apparent commitment by the 9 members of the monetary policy committee in August’s meeting to cut rates and add more quantitative easing to help things ‘tick over’ if necessary going forward. They will make a judgement as to what the fundamentals look like over the coming weeks allowing them to take a more considered approach.
The rot goes deep with the pound, let’s not pretend that it isn’t, but weeks like this are a welcome relief from the collapse we’ve endured in the 3 short weeks since Brexit. There’s an opportunity here to get euros at around €1.20, which is far more attractive to the near €1.15 that we opened with on Monday morning.
My message during these uncertain times is be alert, be realistic, and be lucky.
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.