Sterling exchange rates have lost a little ground against most major currencies over the course of the trading week, most notably hitting a 5 week low against the Dollar during yesterday’s afternoon trading session.
It seems that global sentiment is starting to slip again, and fears of a second wave of COVID-19 along with a major global recession are leading investors to batten down the hatches and take cover which is leading to some Sterling weakness.
For those that were following Sterling exchange rates in March, we saw the GBPEUR interbank exchange rate drop to just below 1.06 and GBPUSD drop into the 1.14s. A lot of this movement was put down to a drop in general market sentiment, which led to a vast amount of money coming out of U.K stocks and shares. With the U.K stock market generally having a lot of foreign money invested into it, those funds were withdrawn and taken back out of the pound, leading to a decrease in demand for sterling and therefore a drop in the value of sterling exchange rates.
There are concerns that a similar pattern may emerge in the coming weeks, but as with everything when in the midst of a pandemic nobody really truly knows what may happen next, we can only go off what we think may happen based on best endeavours and recent history.
Brexit Starts to Hit Headlines Again – June is Still Key
Four days into the latest round of Brexit talks and it appears on the face of it that both sides are no closer to a deal and that the whole situation is still at a total stalemate. Boris Johnson still has red lines that he is unwilling to compromise on, including fisheries and the role of EU courts. It does seem like very little progress has been made at all since these negotiations began, and with 7 months to go and a pandemic to deal with it does make you start to wonder how this whole situation may pan out.
There is one more round of negotiations in the diary before U.K politicians will meet in June to decide on whether or not to look to extend the Brexit deadline beyond the end of the year. So far there does not seem to be any desire to move the date from Boris Johnson and this is where the words ‘no deal Brexit’ may start to hamper the value of the Pound once again if no extension is taken and it still seems like no progress has been made.
For those that have not been too involved in any currency exchanges recently a no deal Brexit being mentioned over the past year or so has tended to lead to sterling weakness, investors see this as potentially very bad news for the U.K economy, and with the current bill for COVID-19 escalating at a wild pace, a no deal Brexit may not be the tonic that the pound needs at present.
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