Welcome boost for Sterling after a flat April

1 May, 2019

Rob Bastin

Throughout the month of April Sterling market’s have been incredibly subdued, with many key pairs trading sideways in a small range for a number of weeks. Brexit has taken a breather over Easter but risk levels are likely to increase significantly in the coming weeks, whether you are buying or selling the Pound. In the last 24hrs, we have seen further reports that Theresa May will not make it through the summer as Prime Minister if she does not get a deal agreed in parliament over the next few weeks, with Conservative members losing patience and ready to challenge her position as early as the end of May. Any political instability of this sort would make for tough times for Sterling and would very likely see a return to lower rates, with a further extension beyond October 31st very probable in this scenario. Any further delay in Brexit is also likely to delay the BoE plans to hike rates again, adding further short-mid term pressure on our currency.

In contrast to these downside risks, Sterling actually enjoyed its best day of the month yesterday as April comes to a close. The Times reported that several senior Labour members had spoken of significant progress in the cross-party talks, that could see a potential majority move towards a customs union agreement. GBP/EUR peaked at the best buying rates for over 3 weeks, and cable crucially moved back above 1.30 again for the first time in a week after a buoyant US Dollar had pushed rates to the lowest in over 2 months. The next few weeks are set to be crucial for Sterling exchange rates over the Summer, if parliament can find a majority for a new Brexit direction then we can expect the current rates to remain stable and higher in the coming months, however if she cannot come to any agreement then we could face the prospect of a new leader or a new government which could easily see the 5% gains in rates this year wiped out again over the coming months.

No-one knows what the outcome will be, but traders are sat ready to buy or sell the Pound accordingly with any developments. The key thing for anyone needing to exchange currency in the comings months is not to try and second guess the impossible, but instead to understand, quantify, and manage the real risks that lie ahead, and if you have not done so already then contact your currency consultant today for some friendly guidance on this risk management. Currency Index can help you manage the risks of adverse movement with tools such as LIMIT orders and STOP LOSS orders, or by simply mitigating some the risk through tranche trading.

Today is the beginning of the new month, and with it comes the usual raft of new data for the markets to digest. Today kicks off with UK Manufacturing PMI at 9:30am (drop to 53 from 55.1 expected) followed by US Manufacturing PMI at 3:00pm and a Fed interest rate decision at 7pm this evening. No changes to rates are expected today with the Fed currently holding any further hikes, a decision that could easily prolong into 2020. In the UK local elections also get underway tomorrow.


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