Political uncertainty a heavy weight

24 May, 2019

Rob Bastin

As Theresa May clings onto her position with her fingernails, Sterling exchange rates seem to be doing very much the same. After 15 consecutive days off losses for the pound, yesterday saw the first (very small) gains for sterling exchange rates. This is very unlikely a sign of further gains to come, but instead, more of a natural pause in this downward trend whilst markets eagerly await the Prime Minister’s fate. Pressure on Theresa May is building by the day with MP’s keen to have a new leader appointed before the summer recess, in order to give the individual as much time as possible to make Brexit plans ahead of October 31st. The big question is when Theresa May finally falls, will the Pound follow suit? Political uncertainty is one of the heaviest weights on a currency’s value and the upcoming political changes present some of the most uncertain times seen for a number of years. Who will be leading the country in a month or so’s time? Will we have a general election? What will the new leaders’ position on Brexit be? Will ‘no deal’ be back on the table? Will the UK have to request yet another extension from the EU?

When assessing the various questions above, there are few probable answers that provide optimism and positivity towards the UK economy and a Brexit resolution. Instead, there are many likely outcomes that only heighten the current concerns and add greater complexity to both Brexit negotiations and mathematics within parliament. It is fair to say that any prior optimism of getting Brexit resolved anytime soon have faded fast, with probabilities of worst-case outcomes once again increasing. This is notoriously a busy time for property buyers as the summer kicks in, and understandably will be a very tricky market to navigate when trying to time a currency purchase and manage the risks. If you are in this boat then make sure you are in close contact with one of our expert currency consultants for the right guidance on protecting your purchase.

The rough week finishes off with a key UK data release this morning, that only adds further uncertainty to the picture in the form of Retail Sales figures for the month of April. These stats are notoriously volatile and unpredictable, with big swings often seen from one month to the next. Whilst the markets are far more concerned with other matters at present, this release has the potential for movement given the market has flattened out again in the last 24hrs.