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Why is the Pound so Weak? British Politics Dictate (James Lovick)

Friday, October 14, 2016 9:08
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The pound has found a degree of support after a torrid two weeks although it would be unwise to think sterling couldn’t fall lower. It is exactly one week today since the flash crash which saw 6% wiped of the price of sterling in the space of a couple of minutes in overnight trade and never fully recovered. An investigation by the Bank of England is underway but there is a chance there may be a repeat of this kind of behaviour as no official reason has to date been given.

Inflation data is released early next week for the UK and this release will be very keenly viewed in light of “marmitegate” and the huge public interest in this. The matter appears to be resolved after a standoff between the bosses of Unilever and Tesco before things got ugly. The reality though is that prices will go up in the supermarkets as a result of the weakness in the pound. It’s just a matter of when it starts feeding through into the official inflation numbers. You heard it here first – When it happens it is all going to be brought back to Brexit with heated debates from both Remainers and Leavers which will create more volatility for the pound.

The general consensus now is that Britain will follow the course of a hard Brexit and the markets appear to have been caught out somehow unaware. Even European Council President Donald Tusk has stated it’s hard Brexit or no Brexit.

The pound is now under added strain with a high court case which commenced yesterday where a team of lawyers are trying to force the government to hold a vote in Parliament before Article 50 is invoked and for full consultation to take place. A decision is expected by the end of the month although it will most likely be referred to the supreme court and a slot has been made in December should this happen. The outcome though in this circumstance is expected to be concluded by the end of the year. This added complication of taking the government is just adding further uncertainty to an already volatile pound. Politics is now the largest driving force behind the pound! There has never been so much happening in these markets so it is certainly good to talk all of this through if you have a pending currency requirement.

Selling Euros?

Those clients who have a requirement to sell Euros would be wise to get in touch. There is so much happening in these markets even on a daily basis. The pound continues to remain under serious pressure following all the political developments and this situation is not going to change any time soon on the premise that Theresa May will be invoking Article 50 sometime in March 2017. This leaves us with almost another 6 months of Brexit limbo and there are likely to be some good opportunities around the corner.

Clients who are holding sterling are seeing a very volatile period at the moment which is unlikely to change any time soon. The Brexit jitters are keeping the pressure on the pound. If you would like to be kept up to date with all the latest market movements, or simply wish to compare our award winning exchange rates with your current provider, then please feel free to contact me on 0044 1494 787 478 and ask one of the team for James. Alternatively, I can be emailed directly on


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  • Ahmed

    It’s for obvious reasons I guess and I don’t think we are likely to see any major changing at all, so it’s wise only not to put hand into this to be on the safe side or else it could be extremely risky if we don’t get it right. I am able to do it all very nicely which is thanks to OctaFX brokers with their top notch features and facilities including low spreads, high leverage, bonuses and even daily market updates available which s all very much ideal.

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