Yesterday’s trading saw the pound to euro rate make gains of 0.88%, and GBP EUR interbank exchange rates swept above 1.11 as the pound had a positive day of trading against all major currencies, a rare occurrence over the past few weeks.
GBP was the strongest major currency of the day making gains of over 0.5% against USD, CAD, AUD, NZD, ZAR and many other currencies.
In terms of economic data there really was very little for the market to feed off of, and that is also the case for most of the trading week ahead, so it does seem that general market sentiment may be the underlying reason for the pound’s solid performance.
Why Has Sentiment in Sterling Risen?
With so many impacting factors in play in the current market, it’s difficult to really pin down a reason for yesterday’s gains, however there are two factors that may have played their part in sterling’s increase in value, one being Brexit talks and the second being the summer economic statement, due to be released today.
Brexit talks resumed yesterday with David Frost and Michele Barnier reportedly kicking off the weeks negotiations with a meal, and it does seem that there is a growing feeling that albeit a very slowly moving situation there does appear to be a little progress and both sides are starting to offer small compromises.
Reports over the weekend suggested that there does appear to be a landing zone and with talks now due to happen all the way throughout July this could be the month where we see a breakthrough.
Let’s be honest, we’ve seen green shoots many times before only to be left disappointed and for the pound to drop off again, however the clock is ticking and a deal does need to start to take shape fairly soon for the particulars to be ironed out before the deadline of December 31st.
We could have enough news in the next two months to constitute the markets feeling like a deal will be done and off the back of this sterling exchange rates may flourish, but it is key not to get too excited about this, as talks like this could also easily break down which would likely do quite the opposite.
If you are holding out to make a large currency purchase then the only thing that is certain in the next few months is volatility, so you need to be in the position to act fast and it is also prudent to have a proactive and effective currency broker on your side.
If your bank or chosen currency broker/currency app is not proactive and quick to inform you of opportunities or adverse market movements then feel free to contact us directly by filling in the form below, we pride ourselves on keeping clients up to speed with the very latest movements and can add real value to any exchange you are looking to carry out.
Today Rushi Sunak is expected to release a summer statement, which has been suggested is a mini budget, and this could have an impact on the value of Sterling depending on how the market digests his plans to start moving forwards.
Some of the possible announcements he may make include cutting stamp duty on homes worth up to £500,000, VAT cuts for the hospitality industry, changes to the job retention scheme and a £3 billion green initiative on upgrading the energy efficiency of homes, public buildings, schools and hospitals – Creating jobs along the way.
There are many other potential additions to the statement so it will be one to closely watched, at the time of writing this the expectation was that this release could be around 12:30 this afternoon.
It does seem like the Government are going to try and spend their way out of this current global crisis and pending economic hangover, which is a very bullish way to approach things and only time will tell if it is the right move.
Nether-the-less, investors and speculators will be watching the Chancellor later today and will likely make their own mind up as to whether the measures are positive or negative for the pound and this could lead to a fairly volatile afternoon of trading.
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