Over the last 2 weeks GBP/USD, also known as cable, has increased by 4 1/2 cents making a $300,000 purchase £7,960 cheaper. This is fantastic news for clients buying US dollars as cable had been trading in the 1.20s for a considerable amount of time.
The reason why the pound had a fantastic finish to February was because UK Prime Minister Theresa May confirmed that she will give MPs a say if her deal does not get a majority later this month. The three votes that will take place are:
- Back Theresa May’s deal
- Exit the EU with no deal
- Extend Article 50
For many months “Leave” MPs have said they won’t back the PMs deal as its not the Brexit they want. However the reality is that if they don’t support the PMs deal now, the likelihood is that Article 50 will be extended and the UK won’t leave the EU at the end of the month. Therefore I expect the voting patterns will be different this time round and I expect members of the ERG headed by Brexiteer Jacob Rees Mogg to back the PMs deal.
The votes will be tight, therefore clients converting GBP/USD should expect major volatility this month.
Another positive for the UK is that the largest Sovereign wealth fund in the world, based in Norway has confirmed they will be upping investment in the UK. The €1 trillion organisation are clearly of the opinion that deal or no deal, the UK will continue to be a force globally and that’s why they have offered support.
It’s a busy day for US economic data releases. Manufacturing numbers are in the spotlight and it is anticipated that the ISM Manufacturing PMI for February is going to decline to 55.5 from 56.6. If this is the case I expect the dollar could come under pressure this afternoon and finish the week on the back-foot.
For clients that are purchasing US dollars today, holding off until the end of the day would be my strategy. Longer term the ongoing Brexit saga is going to be the key driver. Will the Prime Minister secure a deal? That is the golden question.
For more information on how Brexit could impact your currency exchange feel free to get in touch by sending me a message using the form below and I will personally give you a call.