Sterling has had an interesting week vs the Euro but started to drop during Friday afternoon’s trading session as speculators sold off the Pound in advance of this weekend’s Conservative Party Conference.
In recent weeks the Tories have been rather divided and if we have more evidence of it this weekend I think this could cause a problem for Sterling exchange rates during the early part of next week.
Indeed, when Theresa May gave her statement last week she announced that she was committed to following the decision made back in June 2016 when the UK voted to leave the European Union. She went on to confirm that whilst she is leader there will be no second referendum.
This has led to some pro-Remainers in the Tory party to consider plans of how to remove her from power and if there are further rumours during the conference then I think this will also lead to Sterling weakness as it will cause a huge amount of political stability.
Looking forwards as far as I see it there are 3 stumbling blocks in the way for Sterling to get through over the next few weeks. The first is the Tory conference followed by the EU summit due to be held on October 18th. This date will be key as to how Sterling may perform over the next few weeks as at the moment the UK and the EU are at a stalemate with the talks.
The Chequers plan was rejected last week and as yet the EU have not come up with an alternative. Therefore, there is potential for a huge amount of volatility during the EU summit depending on how the talks go.
This will be followed by a potential emergency Brexit meeting in November with a date yet to be agreed. What is clear is that there is a lot of uncertainty during the course of this month so many of my clients who are buying a house in Europe are opting for a forward contract which allows you to fix your exchange rate for a date in the future.
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