Political Stability helps the Pound
Before I jetted off to Menorca, it looked like the UK was in for a prolonged period of political uncertainty. The Conservative leadership race was underway, but when Andrea Leadsom pulled out of the race, it paved the way for Theresa May to become our Prime Minister. I think this is a good choice, and it also means we've avoided a lengthy 2 month leadership contest that would have been quite destabilising in what is a critical time following the vote to leave the EU. Markets hate any type of uncertainty, and this was one of the reasons the Pound was struggling.
I'm encouraged by our new Prime Minister and the markets certainly reacted positively, with the Pound rising when the news broke.
Interest Rates and the Bank of England
The other main reason for Sterling's rise is the fact the Bank of England last week chose to leave interest rates on hold at 0.5%. Many had expected them to cut rates by 0.25% and this had been partially priced into exchange rates. When they decided to leave things as they were, the Pound made some gains. I still think that the BoE will have to do something in the coming months, whether it's a cut to the base rate, or an increase to our QE stimulus programme. If either of these things happen in August, expect the Pound to fall.
What next for Sterling exchange rates?
Things are not as bleak as many had predicted in the immediate aftermath of the Brexit vote. The IMF have recently revised their gloomy predictions for economy growth, saying they expect the UK to grow at a faster rate than Germany and France. Once we leave the EU, we will also be free to make trade deals with other major economies, something the EU was unable to do. However, all of this is some way off, and while the immediate political uncertainty that was holding the Pound back has gone, we now face a prolonged period of economic uncertainty, and it's for this reason most major banks and analysts still expect the Pound to remain under pressure.
When the UK invokes article 50, probably early next year, the process of negotiation with the EU can start, and it will then take at least 2 years before everything is finalised. Until then, nobody knows what the future will hold, and this is likely to limit investment and confidence in the UK economy.
Get in touch to find out more about our currency services
This blog is an excellent resource for those that need to keep an eye on exchange rates, and find out what is moving the market. While it's impossible to predict in which direction exchange rates may move, having a sound knowledge of the what is happening and why can be invaluable in deciding what action to take, and when to fix a rate of exchange.
We don't just provide market reports and commentary on exchange rates, we are also a provider of commercial foreign exchange, and provide exceptional rates of exchange for both private and business clients. If you need to exchange currency, then it's certainly worth getting in touch to get a quote and compare our rates with your bank or existing broker.
How we can help you
We deal with both large and small volume transfers, and can help with most foreign exchange requirements. I should point out that we don't deal in cash or holiday money, rather we wire your funds to a bank account, so you need to have an account for the currency you wish to purchase, be it Euros, US Dollars or Australian Dollars for example. We can also wire funds directly to a 3rd party; e.g. the solicitor dealing with your property purchase, or your suppliers in Europe or China. We deal with amounts from £5k to £10m, and trade over 35 international currency pairs. Click here for live currency charts.
If you have a holiday home abroad and need to top up your account, our service is ideal. For larger transfers, for buying or selling a property overseas or for businesses that make large international transfers, or take payments in foreign currencies, the rates we offer could save you thousands of Pounds. We are fully authorised by the FCA, and have a range of contract types to protect against currency fluctuations.
If you would like to find out more about the mechanics of how our service works, or simply get a quote to see how much you could save, click below.