At present the UK Prime Minister Theresa May is planning her approach for the EU summit which is set to start on Thursday. It’s been highlighted by many financial institutions that the summit has the potential to have a considerable impact on Sterling exchange rates, as the negotiations are being labelled as the most important in the process so far.
In recent weeks there is an argument to suggest that cracks are now starting to appear in UK business, as many are either announcing that it is finally time to make arrangements elsewhere in the EU or reports are suggesting they are making plans without going public. Last week the company Airbus which employs a staggering 14,000 people and generates £1.7bn in tax warned the UK government that they could be taking their production of aircraft wings elsewhere due to the lack of clarity being given. Furthermore a few leading names within the car industry such as BMW and Jaguar Land Rover have also weighed in to the argument and announced job cuts due to the lack of clarity and uncertainty that it has created.
Across the Atlantic, trade wars continue to make the headline news in the US. It was only yesterday Harley Davidson announced they would move their business out of the US as the tariffs imposed on the EU would mean the bike giant would have to pay an additional $100bn a year to ship to the EU. So far the reaction from traders has been fairly muted and it doesn’t appear that the ‘safe havens’ have benefited, however in time if this story continues to escalate you would think currencies such as the US Dollar and Swiss Franc would benefit.
With UK politicians squabbling about what is best for the UK’s future, I find it hard to see how the Pound is going to gain any substantial momentum against the US Dollar. This week’s summit should provide a further insight and if Theresa May fails to give further clarity, coupled with the Federal Reserve announcing that further interest rate hikes are on the horizon, I believe its only a matter of time until cable is trading below 1.30.
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