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You are here: Home / British Sterling / The Pound continues its downward trend

The Pound continues its downward trend

March 10, 2017 by Rob Lloyd

The Pound extends its losses against the Euro and US Dollar in the early hours of Friday’s trading session, following another string of poor economic data that shows a contraction in UK production. Both Industrial and Manufacturing Production figures came in worse than analyst predictions, despite a weaker Pound making UK products more attractive.

Brexit is the real issue at large, as the government prepares itself for an EU-exit in the coming weeks, possibly days, markets are looking for any signs of confidence in UK PLC.

The good

Higher inflation looks set to continue and few signs as yet, put to a slowing down of consumer spending. If this trend is set to continue and wage growth can keep pace this may soften the blow created by the Brexit vote.

Amid the frantic toing and froing from the House of Commons and Lords, the key issue of EU citizen rights is still a hot subject, but comments from Guy Verhofstadt this morning suggest that UK citizens may be able to keep their right to free movement after Brexit.

The UK trade balance has posted another positive figure as the balance of imports/exports change course. In the wake of the Brexit vote, British exports became far more attractive pushing up demand for all things British. This comes at a price however, as the opposite is true for products overseas. Consumer prices have already risen since the vote last June which in turn could drive lower consumer spending, watch out for UK retail sales this month.

The bad

The UK is heading for a complete change of direction and will need to untangle 4 decades of social, political and economic ties with the remaining 27 members. Hopes for a quick trade deal look slim, given that it took Canada almost a decade to reach any agreement with the EU. Much more than this, the government’s stance on Brexit has only further salted the wounds of the European project.

It’s not so much that Brexit is a bad idea, if the government had a contingency plan from the word go, the impact it would have had on the Pound would have been limited. Instead, May plans to take the UK through a black hole and hopes that the other side will offer bigger and better opportunities.

The PM plans to opt for a no deal if the UK receive a worse deal than it currently has, and the prospect of this situation ringing true has GBP investors running for the hills.

GBP/EUR looks set for 1.13 next week, but the elections in Europe are likely to take centre stage in April which may give the Pound opportunities to make headway.

Filed Under: British Sterling

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About Rob Lloyd

Robert brings with him a wealth of knowledge on what is impacting exchange rates, especially around the subject of the EU Referendum and the implications for Sterling and Euro exchange rates.

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