Sterling Exchange Rates Fall on Future EU Trade Uncertainty (James Lovick)

The pound has fallen against most major currencies today after what was a reasonable start to 2018. Despite better Industrial and Manufacturing Production numbers released this morning the pound has still managed to lose ground. Industrial Production jumped considerably higher in November to 2.5% up from 1.8% the month prior whilst Manufacturing Production also improved highlighting a better outlook for the sectors although rates for GBP EUR dropped by over 0.5% against the Euro to 1.1280 moving away from the five week high seen this week.

The ongoing Brexit uncertainty continues to be a negative influence on sterling exchange rates with rates after it has been reported that the EU and Germany in particular are unwilling to allow Britain to offer financial services within the EU if Britain is no longer in the single market. It has also been reported that the EU have written to a number of different industries warning about the prospect of a no deal outcome. The news is of concern for clients holding GBP as it highlights the very real risk of a hard Brexit which remains the biggest concern for sterling exchange rates.

Some good news however came from the National Institute for Economic and Social Research which has improved its Gross Domestic Product estimate to 0.6% against expectation of 0.5%. The data is an excellent precursor to the official data and anything positive in the growth numbers should be seen as positive for the pound.

Until some real clarity is offered in the second round of Brexit negotiations which will tackle the more challenging discussion over trade then the pound is likely to remain on the back foot. UK inflation data is released next Tuesday which should be of particular interest for any clients holding pounds or looking to secure sterling. Any pick up in the inflation numbers is likely to help support the pound as it could signal another interest rate increase later this year if the Bank of England fees obliged to act sooner rather than later to reduce those inflationary pressures.

Clients looking to secure funds with sterling are likely to see a volatile start to 2018 in the weeks ahead and there are likely to be some good opportunities as things develop. To discuss your specific requirement and how we can help with any transfers then please get in touch with me James at jll@currencies.co.uk