The answer to this question is probably not. That is because whilst we have just lately had some good news to help sterling find a boost, there are still a number of challenges ahead which sterling will need to overcome in order to remain at this better rates. some of you might laugh at me calling any sterling exchange rate as better but we are much better on most currency pairs than the lows seen only a couple of weeks ago. GBPEUR is now back over 1.20 and GBPUSD has recently hit 1.34. The recent sterling strength is down to two key factors, the appointment of Theresa May and also the lack of any interest rate cut by the Bank of England last week. Theresa May has made clear any Brexit negotiations or invoking of Article 50 are long term so therefore despite the recent bounce for the pound I think economic rather political factors will now play a much greater role on sterling exchange rates. The prospect of an interest rate cut and any QE from the Bank of England (which are predicted for as early as August 4th) could be the big drag between now and Christmas. To learn more on the implication of this on your currency exchange please email me Jonathan on [email protected]
If this happens then the pound could easily retest the lows of 1.15 seen at the beginning of July, I would suggest a new bottom could easily be reached in the lower teens or perhaps 1.11-1.12 but for this to happen there would need to be some very bad economic data and recession for the UK. This lower view was the consensus only last week but financial markets and sterling have benefitted from a relief rally as we avoid the ‘worst case’ scenarios and against their own indications the Bank adopts a more cautious tone.
If the Bank of England surprises markets and fails to adopt any stimulus measures in August and September we could easily see sterling rise higher over 1.20 settling in the lower 1.20’s. There are other factors keeping the Euro weaker including the Italian banking issue plus uncertainty over Greek debt repayments. The Euro is still not performing too well struggling against most currencies except of course the pound. 1.25 seems very distant but couldn’t be ruled out should investor concerns over the Euro flare up again and the pound finds further favour.
As with GBPUSD any QE or interest rate cut by the Bank of England is the more immediate focus and this would send sterling down to retest the 1.27 level seen two weeks ago. Depending on the amount of QE, extent of interest rate cuts or any worse economic news I wouldn’t be wholly surprised to rule out 1.24-1.25. Some forecasters have GBPUSD at 1.20 by the year end but I don’t think that is likely. Rates of 1.25 ish were on most forecasters predictions but the change of tone from Theresa May’s appointment and the lack of cuts so far has helped the pound.
GBPUSD could easily rise to 1.35 territory if the Bank of England fail to act once again and with the US Election in November investors will soon start to begin pricing in the prospect of a Donald Trump Presidency. Such uncertainty combined with a stable pound could possibly see 1.40 again but as with GBPEUR hitting 1.25, it seems very distant.
If you have a currency exchange buying the pound, Euros or dollars then it makes sense to explore all of your options. Every situation is unique and we offer a free information service to help you plan and manage your exposure to the currency markets. I Jonathan Watson work as Associate Director and Chief Analyst for one of the UK’s top currency brokerages and would be very interested to hear from you and offer some assistance with any bank to bank transfers in and out of the UK for business or personal clients from £10,000 to the multi millions.
For more information please email me Jonathan Watson on [email protected], I am very confident I can give some useful insight and if you need it a very sharp exchange rate that will save you money over the banks and typical currency broker exchange rates. Any information is completely free, please email me and I will get back in touch immediateley.