Focus back on Brexit

6 August, 2018

Nakhil Mahra

After the much awaited Bank of England last week, where the base rate has been increased by 0.25% to 0.75%, only the second interest rate hike in a decade. The markets have already priced in the hike, failing to gain on any of its major pairings. In fact, GBP lost ground during Carney’s press conference that usually follows. As expected most of the questions surrounded Brexit and the impact on the UK economy.

The most worrying thing to come out of the press conference is that a ‘no deal’ Brexit is now highly likely, the most ‘undesirable outcome’ out of all possibilities. There are already contingency plans being made and liquidity being made available to banks to cover for any economic down turn and avoid another recession. However, even then, we will need some support from the EU government to make sure things don’t go completely pear shaped. Having a transition period is desirable to keep the impact on the economy an absolute minimal.

This was further supported by Liam Fox, the International Trade Security, who believes the chance of a no deal Brexit is now at ’60-40′. As we approach deadlines and a important period in October now not far away, large banks arouf Europe are now predicting trading levels around the 1.03 and 1.05 on GBPEUR come New Year and around the 1.25 mark on the USD. That is a potential 6 cent swing, have you got enough flexibility on your budget to cover? Speak with your account manager today to discuss how we can help cover for these swings with our forward buying options.

The new week is quiet to start with, with no major data out till Wednesday.

Wed 15.30 USD Crude oil inventories
22.00 NZD interest rate decision.

Fri   09.30 UK GDP and Manufacturing