Luke Trevail, a currency exchange specialist at forex brokers TorFX, looks at the factors driving the pound’s exchange rate this week.
The pound has started the year with a seemingly unshakeable hangover after a subdued trading period over Christmas.
That dark cloud that emerged in the middle of last year was sent into the distance of late, with Donald Trump and problems in Italy and the risk of contagion within Europe becoming the focus. The winds of change are hurriedly bringing that cloud back to us and Brexit seems very much now on the agenda.
The pound is anxious about Brexit, and although we still await the Supreme Court’s ruling on whether they agree with the High Court in giving Parliament the vote on whether to act on Article 50, the Prime Minister seems steadfast in her decision that D-day (Divorce day?) will be in the Spring.
Back in September, during her first party conference as PM, Theresa May said that the government would trigger Article 50 and formally start negotiations for the UK to leave the EU at the end of March. This sent the pound into free-fall, before reversing a touch as the dust settled. So far the government spearheaded by May have been close to ridicule by parliamentarians and constituents alike with little in the way of any plan for our departure being relayed, other than ‘Brexit meaning Brexit’, which doesn’t give much away.
This week the ambassador to the European Union Sir Ivan Rogers quit his role accusing ministers of ‘muddled thinking’ regarding Brexit. It was expected that he would be a key player in the negotiations that will be happening, but did state that they could take a decade to come up with a solution. In the back and forth of politics Sir Ivan was accused of being ‘half hearted’ in his approach following the referendum in June. Swiftly, Sir Tim Barrow has been drafted in to fill the shoes. A previous UK ambassador in Moscow, Downing Street have call him a ‘seasoned and tough negotiator’ whilst he promised to work hard for the ‘right outcome’.
Theresa May said that she will set out more of the government’s plans for Brexit in a speech due to be made soon. We’ll watch closely to see whether her stance on a ‘hard’ Brexit has changed. Keeping some access to the single market seems the best thing for our economy, and indeed the pound so that’s what most of you should be hoping for.
Today, Nicola Sturgeon has suggested that a soft Brexit will see the prospect of another Scottish Independence referendum removed, albeit in the short-term. The SNP leader could easily have a larger than expected role in the outcome of our country this year. Scary to some, exciting to others perhaps, a little like the markets.
As always, if I can offer advice it’s to proceed with caution. Be alive to the market movements expect the worse, hope for the best and think of the sun and sangria.
Happy New Year.
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.
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