Will the pound recover? (Dayle Littlejohn)

Recent economic data releases for the UK have been a mixed bag however exchange rates across the board have been falling. The Bank of England a week ago announced that they believe inflation will continue to rise and wage growth will fall. This dovish statement by the Governor has dampened sterling position and exchange rates for GBPEUR have fallen away from the higher to mid teens.

Looking ahead the UK General Election is the next major talking point. Now that all of the manifestos have been released polls should give us some further indication to who will come out victorious. When UK Prime Minister Theresa May announced the snap election the pound strengthen as a Conservative majority looked likely. After reading all of the manifestos I find it difficult to see any other outcome than a Conservative majority.

However past history tells us leading up to an election the currency can still come under pressure as investors get the jitters. Therefore for foreign currency buyers before June 8th I wouldn’t be relying on the Election to do you any favours.

As long as the Conservatives win a majority you would expect to see a small spike for sterling and then we move on to Brexit negotiations. Bank of America Merrill Lynch Global Research have told their currency investors Brexit talks will provide major swings on the market and therefore opportunity.  However the feel from the Bank of America is that sterling’s good run is coming to an end exchange rates could take a tumble.

Once the election is over I am convinced the main talking point will be the divorce settlement. If EU and UK negotiators can’t come to an agreement Brexit talks could fall at the first hurdle and this is when I would expect to see major falls. On the other hand if an agreement is met with ease we could see the complete opposite. The problem people have that are buying or selling the pound is that it is impossible to predict the outcome of the Brexit negotiations and either way it’s a complete gamble whether to trade before or after.

The most important data release to look out for this week are the inflation hearings Tuesday morning. Even though inflation has broken through the Bank of England’s target of 2%, I don’t see this as positive for the UK. The cheaper pound is causing inflation to rise at more than a steady pace however I don’t believe the Bank of England are in a position to raise interest rates. Consequently this release could cause further falls for sterling exchange rates.

If you are buying or selling the pound for any reason I would recommend getting in touch. It is important to analyse both currencies that you will be converting as the other currency could dictate whether you buy now or later. Feel free to email with the currency pair you are converting and your timescales and I will respond with the options available to you and the process of using our company. The brokerage I work ultimately is here to offer better exchange rates than the bank  and we have been doing this for 17 years, whilst providing clients with market information which will help them make a decision of when to trade [email protected].

If you are using a brokerage at the moment I would strongly recommend dropping me an email with the reference comparison and the figures you are converting and I will let you know our live price monday morning. In the past this two minute exercise can achieve clients an extra cent or two which means on a £100,000 conversion into euros, this could generate the client an extra €1,000 – €2,000 [email protected].