Quiet market before June Brexit talks

6 June, 2018

Maksim Tichonov

Yesterday saw no major changes in sterling with the rating broadly flat, the PMI hit a three/month high of 54.0, up from 53.8 in April, this expansion prompted a stability in sterling against the dollar. With GBP/USD stable and GBP/EUR holding steady, economists believe that growth could soon happen, this can be due to several factors happening in the economy.

Firstly, the GBP/EUR rate has shown some minor positive changes this quarter, with Sterling moving insignificantly against the Euro, potentially due to fore coming negotiations of Brexit terms this June. Moreover, economists suggest that improved confidence in domestic economy could have a positive effect on Sterling soon.

Secondly, the growth in the second quarter could dwarf the 0.1% growth in the first quarter. Since the deadline for deal agreement was set for October this year, the second and third quarter can be very lucrative due negotiations happening during this period.

Lastly, the confirmed raft of Eurozone services and composite PMIs point towards a loss of economic momentum within the currency union, therefore the mood of EUR exchange rates naturally dropped. The signs of the stronger second quarter had a little effect on pound sterling exchange rates, meaning that the fore coming changes in the economy can influence buyer confidence.

With the outlook on the third quarter, UK gross domestic product reading pushed higher across the board, however, as mentioned above the lack of certainty is critical in market fluctuations and their magnitude.