As we move closer to what looks like a very light 4th week of November in terms of economic data releases from the UK, sterling exchange rates could be open to a final wave of volatility with the markets holding out for this morning’s Retail sales figures for clues into how the pound might fare on the international stage as the month draws to a close. The pound has arguably remained relatively range bound against it’s major currency counterparts in the second half of this week with investors for the large part hoping for a breakthrough in talks to be announced at the EU summit before committing behind the pound further.
These figures might provide clues into the weighted relationship between supply and demand as the latest business confidence release from the manufacturing sector is also due to be released on Monday morning ahead of the Bank of England’s (BoE) Hardane’s speech.
The BoE has highlighted the surprisingly high levels of continued business investment despite restrictions up until this point. The question growing was ‘how long this might last?’. Now that we are edging closer to the festive period with no concrete messaging on when these restrictions might be lifted, will we start to see a negative impact on moral across UK PLC rise to the surface? Furthermore, if this proves the case, how damaging could this prove to be to the value of the pound? Those looking to purchase foreign currency with sterling might then want to consider reaching out to their account manager ahead of this release so we can lay out all the options available to you to help you manage your exposure just in case the markets move against you.
Delayed Talks with the EU to Weaken the Pound Once More on the International Stage?
Earlier in the week we saw sterling break through the 1.12 mark on interbank exchange rates before softening once more as news broke that talks between the UK and EU have been delayed again after it was released that one of the European diplomats had contracted the virus.
Chief negotiator Michel Barnier confirmed talks would be suspended for a “short period” although discussions will continue with “full respect” of the guidelines suggesting progress might still be made in the days and weeks to come. It will be interesting to see how this affects business confidence on both sides, given how destructive the uncertainty has proved to be to date. Depending on what kind of solution is found in the interim and most importantly what kind of adapted timescales we see as a result of this delay, it will be interesting to see how the markets react. Appetite for sterling could quickly shift if a promising path for talks isn’t formed before investors get the jitters.
Over the course of the last 6 months we have seen sterling exchange rates edge slowly towards the pivotal 1.13 levels before retreating rapidly through fears these talks might unravel. Evidently the markets remain conscious of the worst case scenarios with a no deal still on the table. Should news break that further delays are to be expected, might we see the pound’s value fall once again on the international stage?
When Might be a Good Time to Buy US Dollars with Pounds?
Sterling holders looking to buy US dollars might be looking at Monday afternoon’s business confidence releases from the services and manufacturing sector in the hopes of another switch in trend for GBPUSD exchange rates. Momentum could well be with sterling once more anyway after the dollar started to fall out of favour, ever since yesterday’s rising jobless claims count. Clearly the new set of COVID related restrictions to everyday business has driven a sharp acceleration in layoffs.
Importantly, the Federal Reserve pinpointed the close relationship between the jobs market, business confidence and consumer spending as being a major roadblock in the US’ ability to pull itself into a position where the economy can recover sustainably.
News of an upcoming trade deal announcement with Canada might also help support sterling’s value. A free trade agreement is due to be made public shortly, which might take some much needed pressure off the government after the delayed talks with the EU and may even pave the way for improved terms with a Biden lead United States too.
As a result of this, sterling has managed to comfortably hold it’s ground above the 1.32 mark against the dollar so far.
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