The pending UK Supreme Court case in the UK is critical to the short term movements on sterling exchange rates and clients with a requirement to buy or sell the pound should be making plans around this. Expectations for the initial reaction to the decision are reasonably clear but once the decision is made we will then be faced with a whole new set of questions over the next direction for the Brexit vote. Markets have loosely priced in the expectation the previous decision will be upheld but there are no guarantees!
If the previous decision is upheld then the pound should rise. GBPEUR could hit 1.17-1.18, GBPUSD upper end would be 1.25, GBPAUD 1.70 and GBPNZD towards 1.80. The pound could easily fall up to 4% if the court case does not go the way markets have been predicting. There is a very strong chance we could be looking at rates on GBPEUR retesting 1.10-1.12 territory whilst on GBPUSD we could slip below 1.20. GBPAUD may drop below 1.60 and GBPNZD below 1.70.
The biggest problem is knowing when this case will be decided. With the Supreme Court reopening tomorrow from their recess period the news could come as early as tomorrow. I expect it will be between tomorrow and next week which gives clients looking to buy or sell sterling a small window of opportunity to plan in.
In order to maximise such an opportunity the best strategy in such a market is number one to be prepared and number two to understand your options. My order book is currently very high with ‘Limit’ and ‘Stop / Loss’ orders. A ‘Limit’ order allows you trade at a higher level whilst a ‘Stop / Loss’ order allows you to protect your rate should the market fall. In such an uncertain and potentially volatile market I feel the best way forward is to use a combination of the above tools to help limit your exposure and trade on any improvements.
If you have a transaction to consider and wish for some assistance with the timing and planning of any exchanges please feel free to contact me Jonathan by emailing firstname.lastname@example.org with an overview of your position and preferably a phone number so I can quickly contact you.
Thank you for reading this post and I look forward to answering any questions on the markets or the services we can provide.
With the pound finally finding some support after a very challenging couple of weeks a very valid question at present is whether or not the pound has now bottomed out. The first reflections following the flash crash which saw GBPEUR hit 1.09 and GBPUSD 1.18 indicated we would see a move lower to perhaps parity on GBPEUR and 1.10 on GBPUSD. Will this now start to materialise or will the rate gently rise as market spotlights focus elsewhere?
Sterling has dropped almost 20% on its TWI (Trade Weighted Index) since the Referendum vote. Billions of pounds of value of the UK economy has been written down as investors fears over the UK’s future relationship with its biggest trading partner manifest on the currency markets. Yesterday’s news on Unemployment shows the economy is still creating jobs, we finally saw some rises in Inflation too this week. A welcome knock on effect from the weakness of sterling versus the deflationary situation only a few months ago.
With the political developments remaining the big driver on sterling we have to be preparing for further losses for the pound. Whilst the Brexit seems to some of us like it has been going on for ages it has only been 4 months since the vote. When we step back from this situation and perhaps reflect on the vote in further months and years to come we will view now as the very infant stages of what is going to be a very long and drawn out process. In such an environment it is difficult to be overly positive for the pound and whilst we might have some small bounces like we have seen this week to help anyone holding the pound, I would not suggest this will be indicative of a move much higher in the short term. Buying on such spikes is I believe a very worthy strategy to avoid being caught off should we see further big challenges on the markets.
Key information for anyone buying or selling the pound comes this morning with UK Retail Sales and then in the afternoon today we have the latest ECB (European Central Bank meeting) where we may learn of any fresh approach by the Eurozone to manage their economy. Any suggestions on future policy direction may cause volatility on GBPEUR rates as well as GBPUSD since swings on EURUSD impact both of these pairs.
I wouldn’t be betting that the pound has now bottomed out since there are still many huge challenges ahead for the UK both politically and economically. The weak pound itself whilst helping Inflation could become more of a problem as it exacerbates the gap between wage growth and prices. I don’t think anyone voted for Brexit to be poorer and one way or another a chronically low pound does make the UK as a net importer worse off.
Sterling is enjoying some of its best news in October with some big improvements particularly against the Euro and US Dollar but it has improved by a small percentage against the Australian dollar and New Zealand dollar too. If you are making a transfer in the future understanding all of your options and the market in advance can really help you to make informed choices about when and how to make your currency exchange. I cannot tell you exactly what to do or what will happen but with nearly ten years experience helping private and business clients plan and manage their FX exposure in a friendly yet professional manner I am sure I can add value with a better rate and some sound analysis.
For more information please contact me using the form below or email directly using email@example.com. Ideally please leave a number so we can speak or please call me on 00 44 (0) 1494 787 478.
The author is Chief Analyst and Associate Director of the UK’s largest private currency brokerage with nearly ten years experience helping private clients and business plan and manage their FX exposure.