The pound has fallen lower today after that excellent run last week which saw sterling surge across the board after the transitional deal in the Brexit negotiations was agreed. Rates for GBP EUR have fallen to a low of 1.1365 today whilst GBP USD touched 1.4066 before climbing higher in afternoon trade.
Whilst a transitional deal has been officially agreed between Britain and the EU, there are still some very big issues which need resolving. Whilst I am of the opinion these issues will be ironed out and agreement should eventually be made there is likely to be an ongoing period of uncertainty whilst the third round of negotiations take place. Talks on the Irish border started yesterday and any developments in the coming weeks coudfl see major volatility for the pound.
The outlook for the pound in the medium term is looking considerably brighter and there could be sizeable gains for sterling exchange rates if negotiations go well. It is in the short term in these coming weeks and months though which should see heightened volatility and continued pressure on the pound. Clients looking to sell Euros for example may wish to convert in this period whilst the pound remains in a weaker position. In my view the pound is unlikely to remain at these weaker levels indefinitely. With higher interest rates in the UK around the corner with an expected rate increase this May the pound should find support and start to drive higher.
Clients looking to buy other currencies such as US dollars or buying Australian dollars with pounds should keep a very close eye on developments from the US. Whilst the US Fed is looking to raise interest rates two or three times this year which should be good for the dollar it is the other developments on trade which are particularly interesting for the markets. The recent tariffs imposed on steel and aluminium as well as the other round of tariffs on imported goods are liked to have wider implications on a number of the other currencies including the Aussie dollar in particular.
For more information on sterling exchange rates and how to make the most of any opportunities in the markets then please get in touch with me at [email protected]