Brexit affect

5 July, 2016

Grace Rae

Yesterday’s news reports turned their focus on Brexit strategies. With the continued political unrest, as we all await on who will be David Cameron’s successor for Prime Minister, all five candidates have spoken about when Britain should trigger Article 50 and formally start the two years of negotiations with the EU. When this happens it will be very likely we will see the pound suffer further.

Bank of England Governor Mark Carney’s announcement towards the end of last week of more monetary easing, no expected rate hikes and rather a rate cut over the summer period, have also added to the pounds weakness. It may not be a surprise to expect that this could be that start of a potential long term downward trend.

Bank Julius Baer spoke on CNBC yesterday morning and voiced concerns of low UK growth and high UK inflation. They have predicted that GBP-EUR could soon be trading to parity and the pound trading as low as 1.12 against the USD in the coming weeks as well as a warnings of a potential recession.

In terms of data, GBP PMI construction posted 4.5 under expectations, while EUR PPI index was up 0.2% year on year and up 0.3% month on month. Neither had much, if any effect on the rates.

All in all, for those looking to sell, the rates are considerably in your favour, however for those who are buying the outlook is bleak. The Pound is still very vulnerable and is likely to continue this way for some time. Although some buyers may be hopeful that things will improve, the reality is that the rates will almost certainly fall further. This morning we have seen the markets fall considerably in the anticipation of the Bank of England’s Financial Stability Report later this morning at 10:30.

If you have an requirement due in the coming months, but do not necessarily have the funds readily available, remember you can secure and fix today’s rates for up to 2 years ahead to avoid and potential further losses.

If you have any concerns about your future requirements, get in touch and call your broker today to discuss your options to secure currency on 01923 725 725.

Today’s data:
05.30 AUD RBA rate statement and Interest rate decision
09.30 EUR Markit services PMI
09.30 GBP Markit services PMI
10.00 EUR Retail Sales
10.30 GBP BoE Financial stability report
15.00 USD Factory Orders