Sterling has remained under pressure of late against most of the major currencies, despite a slight upturn this week.
GBP/EUR rates have moved back above 1.08, putting pressure on 1.09 at the high. This has brought some much-needed respite following the recent downturn, with the economic outlook for the UK economy looking fairly bleak under the current market conditions.
Those clients holding Sterling may well look to the current spike as an opportunity, as any sustainable improvement is unlikely whilst so much uncertainty around Brexit remains. Over the past few weeks there has been multiple reports regarding a disjointed approach, a negotiating team that is out of its depth and a deep concern about how the UK will actually facilitate our exit from the EU.
Whilst it is difficult to know exactly how negotiations are actually developing behind closed doors, it is safe to assume that the UK & EU are struggling to find much common ground. The knock-on effect of this is that investor confidence is drained and the Pound is likely to remain weak as a result.
Personally, I believe any spikes in the Sterling’s value should be considered as an opportunity. It is unlikely that a major increase will occur, until we have some solid information regarding which direction the UK economy is likely to take over the coming weeks or months.
The Bank of England (BoE) have stated that they are not looking to raise interest rates whist Brexit negotiations are on-going. With a concern over the current levels of inflation, it would take a relatively seismic shift in market conditions and sentiment, in order to boost Sterling’s value significantly.
Looking ahead and I feel it is essential that the Brexit white papers give the markets a stronger indication of what the governments aims are and how they intend to boost the economy whilst negotiating our separation from the EU. We have reached a juncture where bad news is almost better than no news and as such, any confirmation of progress or the governments anticipated goals, could help bring some market confidence back and perhaps ease some of the pressure on the Pound.