Despite Sterling finding some support earlier this week, concerns surrounding the UK economy continue to handicap any major advances.
Political scandal is not helping Sterling exchange rates
Investor confidence remains minimal, especially following the latest political scandal causing further unrest. The much publicised fallout surrounding the now resigned Minister for International Development Priti Patel, has heaped pressure on a government already engulfed in controversy and unrest. Investors would be forgiven for being apprehensive as it appears from the outside looking in that Prime Minister Theresa May is struggling to keep her party together on multiple issues, not least our on-going Brexit strategy.
With so much uncertainty around the issue and so many unanswered questions about how the UK economy will fare post Brexit, the Pound continues to face an uphill battle.
When is the best time to buy currency?
I have continually suggested that any of my clients holding Sterling look at short-term opportunities, rather than hold out for longer-term sustainable gains. My opinion on this has not wavered.
For example, last week’s run up until the Bank of England (BoE) interest rate decision provided an excellent opportunity to sell Sterling, with the Pound gaining over two cents against both the Euro and the US Dollar. These gains were quickly reversed following dovish comments from the Bank of England regarding future rate hikes, and this highlights the need to identify and take advantage of these small windows of opportunity.
Whilst this is not always a feasible option, the point is that whilst so many negative variables continue to surround the UK, it is going to be very hard for Sterling to make significant advances against the other major currencies. Betting on a significant shift in market conditions, which is ultimately going to be needed to boost market confidence in Sterling currently looks like a gamble.
Last week’s UK interest rate rise has now been fully integrated into Sterling’s current value and with Bank of England Governor Mark Carney remaining dovish regarding any further rate hikes in the near future, now could be the time to execute any Sterling exchange.