It was an extremely positive week for sterling exchange rates, as the pound made considerable gains against all of the G10 currencies. The shift in sentiment came when UK Prime Minister Theresa May announced that the UK are willing to pay €50bn to the EU as a divorce settlement and the EU appeared to welcome the offer.
This month there are a few key dates to look out for if buying or selling sterling in the future. Tomorrow (Monday) Theresa May plans to have lunch or dinner, (there reservation has not been confirmed) with President of the European Commision Jean Claude Juncker and President of the European Council Donald Tusk. If we receive further clarity on the divorce settlement bill this could cause further strength for the pound however the Irish border could be the sticking point.
The Republic of Ireland have made it clear they do not want a hard border splitting the Republic of Ireland and Northern Island and Donald Tusk has announced this weekend that the EU will back the Republic of Ireland over the UK, as Ireland is still a member state of the EU and the UK will not be.
The UK believe it’s impossible to resolve the Irish border until trade negotiations have begun, as the UK need to have an understanding of the potential trade deal that will be put in place once the UK depart the single market. Rumours are suggesting Donald Tusk agrees with this, so I wouldn’t be surprised to see talks go well this week and this month.
On the 12th EU ambassadors that represent all of the member EU states will meet in Brussels to discuss if enough progression has been made so the 2nd stage of Brexit negotiations can begin. Then on the 14th and 15th December at the EU Summit, EU officials will announce the result. Personally I expect volatility from the 12th onwards as I wouldn’t be surprised to see currency speculators 2nd guess the final decision.
As I have been suggesting in my articles recently I am optimistic that stage 2 Brexit negotiations are going to begin early next year and therefore purchasing a foreign currency will become cheaper, however buying the pound will become more expensive.
Some of my clients do not realise that for people converting a foreign currency into sterling you are still receiving a ‘Brexit discount’. For example on a €200,000 conversion into sterling last week compared to Pre Brexit, you would received an additional £25,000!
Many of my clients until we discuss there requirements don’t realise they have many options available to them. For example if you are purchasing a property in the UK and are waiting for your foreign currency to become available, you can secure the exchange rate now and pay later using a forward contract. This contract will not be offered by your own bank.
Its also important to study the other currency that you will be converting. Feel free to email me the currency pair you are converting (GBPUSD, GBPAUD, GBPCHF etc) the reason for your conversion (company invoice, buying a property) and I will email you with my forecast for the currency pair and the process of using our company email@example.com.
I look forward to speaking with you soon.