Will Liz Truss lead the Tories into the next election and how will this impact the Pound?

GBP USD Exchange Rate Falls to Two-Year Low Amid Political Uncertainty 

Despite being appointed as Prime Minister just over a month ago on the 6th of September 2022, Liz Truss is already coming under pressure and there is speculation regarding her remaining in power already.

The Pound has traded in a more speculative fashion over the past month than it has done for years after a disastrous mini budget which sent shockwaves throughout financial markets, and saw the Pound trade against the lowest level against the US Dollar in recent history.

Truss appointed Kwasi Kwarteng as Chancellor in an ill fated move and he has already been replaced by Jeremy Hunt who has chosen to reverse almost all the tax breaks declared by Kwarteng. The Pound climbed off the back of his announcements and demonstrates the disarray the current government is in, and now Truss is coming under increasing pressure.

In the wake of new Chancellor Jeremy Hunts announcements, Liz Truss apologised for the mistakes that have been made so far.

She also made it clear that she’s not willing to give up and declared that she will lead the Tories into the next election and highlighted that by appointing a new Chancellor, she has restored economic stability.

Moving forward I think there could be further volatility for the Pound relating to speculation regarding the job security of the current PM, especially due to the Tories trailing Labour in the voting intention polls which increases the pressure on the PM. Political instability often has a negative impact on the underlying currency, so if you’re interested in the Pound’s value this is a key topic in my opinion.

Economic data releases today are light so politics will continue to drive the Pounds value today. GBP/EUR has dropped off this morning and lost over 1.5cents since the announcements from Hunt yesterday.

Inflation data will be released early tomorrow morning, so if you wish to plan a transfer around this economic release, please feel free to get in touch. As a currency specialist we have access to a number of different trading options and very competitive exchange rates.

You can contact me directly on [email protected] if you wish to discuss any of today’s topics in further details, and you can also set up rate alerts using our trading systems.

Pound set for another eventful day – Will the Pound rise or fall?

The Pound is set for a fairly volatile trading day again today, with politics being firmly in focus over the course of the day.

The latest Chancellor Jeremy Hunt is due to release an emergency statement on the mini budget at roughly 11am today, which may involve further U-turns, tax hikes and changes to the plans laid out by Kwasi Kwarteng merely a few weeks ago.

That mini-budget sent the markets into turmoil and dented the pounds value significantly, his exit and a U-turn recently have given the pound a bounce back.

All eyes and ears will be on Hunt’s statement, and depending on the contents and messaging it is likely investors and speculators will be ready to move so the pound could see some swift volatility just before, during and after the statement.

Economic stability and political certainty are two of the key components of the value of a currency, and it is pretty fair to say both have been pretty tragic for the UK in recent weeks.

Today will no doubt be key for both where the pound heads next but also for Prime Minister Liz Truss, it looks on the face of it that she is clinging on to power however most of the press have expectations that it will be unlikely she survives past the end of the year.

Clearly, another change at the top would lead to further uncertainty, so it is key that the messaging today lands right. There is a huge black hole in the UK economy and questions need to be answered to settle the markets, Hunt is seen as a safer pair of hands, so should he put together a statement and plan that is taken well by investors and speculators then the Pound could have a really good day.

On the contrary, another poor day for the Conservative party and not only could it be curtains for the Prime Minister, but it could also be a challenging day for Sterling exchange rates too.

Jeremy Hunt speaks in the commons mid afternoon and will also face questions on his plans, so we have plenty of opportunities for pound sterling volatility today.

If you have a currency transfer coming up involving buying or selling the pound, and you would like our assistance, then we can help in terms of rates and also being your eyes and ears on the market.

Feel free to email me directly on [email protected] and I will be happy to get back to you to discuss your transaction personally.

 

Will the government perform a U-Turn? Impact on GBPEUR & GBPUSD Rates

Will a u-turn be coming for the current government?

Three weeks ago the Chancellor Kwasi Kwarteng announced his mini-budget. This caused a huge sell off for Sterling exchange rates.

It also caused an issue for bonds and UK mortgages.

However, since then the Pound Euro and Pound US Dollar has also improved.

Indeed, Sterling Euro rates are currently close to a 2 month high creating some excellent opportunities to buy Euros with Pounds.

The Bank of England recently stepped in and spent a huge amount of money to support the markets.

However, that support is due to end later today.

The government has previously said it won’t do a u-turn but many MPs and backbenchers have suggested that they will.

The Chancellor is due to be returning to the UK early following a trip to the US. Expectations are also rising that Kwarteng may also change his policy on corporation tax.

Will US Retail Sales cause the Dollar to strengthen against Sterling?

Turning the focus back towards economic data and we have the latest release of US Retail Sales data this afternoon.

As the world’s leading economy this will provide an insight into the health of its economy.

Often, if the data is better than expected then this can result in US strength and Euro weakness so watch out for this space later today and its impact on GBPEUR exchange rates.

The expectation for today is that September Retail Sales data are due to support the Dollar.

This should also give further support to the Federal Reserve and its plan moving forward to increase interest rates.

If you have a currency transfer to make buying or selling Euros, Dollars or Sterling then contact me directly for a free quote.

I have worked in the industry since 2003 and I look forward to hearing from you.

Tom Holian [email protected]

Pound Sterling stages comeback following Bailey comments but remains fragile

Pound to Euro Gains After Weaker German Retail Sales

The pound enjoyed a positive session yesterday with gains against every major currency. However, the gains only brought sterling exchange rates back to similar ranges seen for the last few days. Sterling opens the day slightly softer across the board. 

Governor of the Bank of England Andrew Bailey prompted a sterling sell-off late into Tuesday’s session. He stated that the bank would remove its current emergency support for the UK bond market on Friday and that pension funds heavily invested in UK government bonds (known as gilts) had three days to get their act together. 

The banks initial intervention in the gilts market provided respite for sterling exchange rates after the pound hit all-time lows against the dollar and multi-year lows against the euro, therefore, the removal of the current intervention is seen as negative for the pound and could cause more volatility. 

A number of bankers reported yesterday that they believe the BoE will adapt a more flexible approach to allow pension companies more time to re-organise their portfolio’s risk. This is likely why the pound recovered yesterday with traders calling the banks bluff.  

It would be wise to expect more volatility for the pound towards the close this week as we discover whether the bank will stick to Baileys indication on Tuesday. Markets remain susceptible to any commentary that could be seen as negative for the UK’s economic outlook. 

GDP figures show that the UK economy shrunk in August by 0.3% which adds further speculation that the UK is heading for a recession. Sterling fell to 1.05 against the euro the last time the UK was in a recession. 

Questions remain over the government’s ability to pay for the billions of pounds worth of tax cuts that were announced in the mini-budget. Liz Truss confirmed yesterday that the government would not cut public spending. These comments will do little to support the value of the pound. 

What to expect from today’s session? 

BoE member Mann will be speaking around midday and the markets will look to decipher any commentary on policy that could impact the pound. There are also some key data releases in the US (Consumer Price Index and Jobless claims) that could cause volatility for cable rates (GBPUSD) and USDEUR. 

If you have an upcoming currency requirement and are interested in hearing about how the current volatility could affect you, please feel free to reach out to me directly via [email protected].

Will the pound strengthen in the future? Don’t bet against the Bank of England!

Pound to Dollar Rate Pushed Higher by Falling Covid Cases and Weak Dollar

The pound has been trading lower in the last 24 hours, as markets become fearful that the Bank of England will withdraw it’s market interventions. The Bank of England has been ripping up the rule book once again with less than standard procedures, with the emergency bond-buying program.

Expectations over just what the Bank of England will do next have seen the pound rising and falling, as the market tries to second guess what happens next.

Let us rewind two weeks, to the crash on the 26th September, following the mini-budget from the new Chancellor Kwasi Kwarteng. We soon saw the pound falling as investors confidence in the outlook for the British economy collapsed.

There was notably a very quick recovery that week, with the Bank of England’s pledge to buy ‘gilts’ or UK Government debt, helping to shore up confidence. The pound rose as investors became confident the BoE would step in, and there was also the prospect that the BoE would be needing to raise interest rates much higher, thereby supporting further the pound.

The twist this week, is that the BoE are now threatening to withdraw this support, and this has had the knock-on effect of seeing the pound lose value, with GBPUSD back towards the 1.10 level, and GBPEUR in the 1.12s.

The key question is do we believe the Bank of England will no longer intervene again in the bond markets? In underpinning the pound, and confidence at home and abroad, the BoE plays a fundamental role in monetary policy, and in painting themselves into a corner, do run the risk of potentially have to back track in the future, thereby losing credibility in the process.

FX markets were buoyed by the expectation the BoE would stand firm to support the pound and volatility, if they are now using that steadfastness to sit out of any future events that require their input, the confidence their prior approach helped to instil, could easily come crashing down.

If you need to make an FX transaction or international payment, understanding the latest trends and forecasts can be very useful in the planning and management of your transfer. As specialist FX brokers, we can help to provide insight, strategy and information regarding your options, to help you make an informed decision.

For more information or to ask any questions please email me Jonathan on [email protected]

Thank you

 

Will Sterling continue to lose value despite the Bank of England’s efforts?

GBP AUD Moves Higher with a UK GDP Boost 

Sterling exchange rates have begun the week on the back foot despite efforts from the Bank of England to support the currency and the UK economy as whole.

After hitting an all-time low against the US Dollar two weeks ago, and an over 18-month low against the Euro at the same time, the Pound begun a fightback thanks to some backtracking by Chancellor of the Exchequer Kwasi Kwarteng after a disastrous first mini-budget.

Those of our readers hoping for a stronger Pound will also be aware that the Bank of England has waded into the UK’s inflation issues and aimed to boost the struggling Pound over the past week. Yesterday morning the Pound saw a slight boost after the Bank of England announced that it intends to step up measures to buy long term debt and protect pension funds from further strain.

There were rumours that large pension funds were at risk which applied additional pressure on the Pound two weeks ago.

Despite these efforts, and a strong recovery for the Pound against the Euro last week and also for cable (GBP/USD) to a certain extent, Sterling weakened yesterday afternoon and this downward trend has continued this morning.

Data released this morning from the Office for National Statistics (ONS) shows that UK workers have suffered an almost 3% hit to real wages owing to increasing inflation. Negative economic updates could put further pressure on the Pound as it’s under heavy focus at the moment after such a volatile few weeks of trading.

Moving forward, tomorrow’s GBP estimate (11am) could result in further market movement for the Pound so do feel free to register your interest with us if you wish to be updated regarding market movement for the Pound.

You can set up rate alerts if you wish to be updated regarding the Pounds value, and if you would like a free quote when planning on making a currency exchange please feel free to get in touch directly on [email protected]

Will Liz Truss speech sink the pound today?

GBP EUR Exchange Rate: The Week Ahead August 15th

The pound could be in for another rollercoaster ride today, as investors will learn of Liz Truss’ latest plans for the economy ahead. Delivering her speech on the closing day of the Conservative Party Conference, markets will once again get to deliver the verdict on how it feels the Government is doing.

Sterling has made a very impressive rebound from the recent lows, with GBPEUR back over 1.15 and GBPUSD 1.12 in the last 24 hours. If we forget last week, these rates are near the bottom ranges of where sterling had been trading in September.

However, last week’s absolute lows make 1.12 on GBPUSD and 1.15 on GBPEUR look like some very attractive buying rates for sterling holders.

GBPEUR levels hit 1.07, that means on a £200,000 purchase of Euros, you would at yesterday’s highs achieve an extra €16,000. For a £200,000 purchase of US dollars, you would be receiving an extra $18,000 in the same equations using rates of 1.03 to 1.12.

Such dramatic rises and falls are rare in the FX markets, but do happen and remind us of how the unexpected can occur, triggering excessive movements.

The unexpected nature of the FX markets is one of the key reasons to be prepared when considering and desiring to purchase at a better rate. Simply saying ‘I want to wait until the rates gets to x or y’ is not always the best plan.

This is because, if you are trading on a large amount of money, you will often have to take some extra steps to be ready to buy. You will then also have the problems of whether or not you are truly getting the best rates of exchange, from a competitive source, that allows you to maximise your exchange.

If you have a currency exchange to make, and wish to ensure you have all the correct information about the FX markets to make a decision, please feel free to contact mw to discuss strategy.

I have worked as a FX dealer for 13 years, and can provide market insight and information, to help you make an informed decision with regard to buying or selling the pound. So, if you are looking at business payments, buying or selling Euros or USD (or any other currency), or maybe you have a property investors looking to repatriate funds from overseas, please feel free to get in touch for a balanced assessment of the outlook, your options and to benchmark any currency rates offered.

Thank you,

Jonathan

[email protected]

Will Sterling continue to recover following last week’s dramatic sell-off?

Pound to Dollar Rate Drops to One-month Low

Yesterday the Pound begun the week in a strong fashion, following on from its recovery towards the end of last week.

During last week’s trading session the Pound traded within an 8% range against the US Dollar and the trading range for GBP/EUR wasn’t far from this kind of dramatic trading range either. I would say that it was the most volatile week of trading since the Brexit vote took place back in June of 2016.

The Pound begun to fall in value in the fall-out from the Chancellor of the Exchequer, Kwasi Kwarteng’s mini-budget report when he announced that the government planned to scrap the higher tax bracket of 45p for higher earners. Financial markets were concerned with this plan along with a number of other announcements from Kwarteng and the Pound begun to tumble as a result.

The decision to go back on this plan, along with rumoured Bank of England buying up of long term bonds to stabilise the Pound’s value and financial markets has helped the Pound recover after it hit the lowest levels in history against the US Dollar, and the lowest level against the Euro in almost two-years.

Although the Pound has now recovered against the Euro and also recovered some of the losses against the US Dollar, moving forward there remains a number of underlying issues which could put further pressure on the Pound. The Conservative Party are facing a number of challenges as there didn’t appear to be a clear consensus between them regarding the financial announcements at the mini budget. Also, Labour is leading in the polls by a considerable margin so there could be political uncertainty in future which could put pressure on the Pounds value.

When markets are moving this quickly, and political updates are having such an impact on the value of the Pound it can be difficult to know when to make currency conversions and that’s where having a currency specialist on hand to keep you updated can be helpful. We can provide you with market updates and also help set up rate alerts to keep you informed.

For further information please feel free to contact me directly on [email protected]

Will the pound weaken again in October?

The pound suffered some particularly volatile movements last week, with GBPEUR rising and falling 7 cents, and GBPUSD 9 cents. This relates to around 6% worth of movement on GBPEUR and 8% on GBPUSD.

Such movements just highlight how volatile currency can be, and indicates why any clients looking to buy or sell the pound should be very conscious of the current market, and some of the particular attributes and behaviour of a currency, that can influence such sharp rises and falls.

This week the Conservative Party Conference will see Liz Truss deliver the closing speech on Wednesday which could be a market mover. Whilst investors were forewarned and had some expectations of the ‘mini-budget’ that took place the Friday before last, the extent of the volatility did appear to take many by surprise.

In a sign of the less than coherent narrative coming from Downing Street, Kwasi Kwarteng has this morning announced he will be reinstating the 45 p, top rate of income tax. This is following a series of public displays of concern from MP’s and cabinet members alike.

Kwasi and Liz have shown they are willing to listen to their own party, and also the public, but does this not also display a weakness and uncertainty over the confidence they supposedly had in their economic agenda?

The pound has been weaker because of the economic uncertainty over the new government’s plans. The huge increase in public spending, via tax cuts is widely seen as an ill move considering the delicate nature of the economy at present.

Investors are concerned that the UK is taking too big a risk with the tax cuts, and a more sensible approach on fiscal policy, to help balance the books is preferable.

Only time will tell, but with the Bank of England being forced to react to the potentially inflation boosting tax cuts, there continues to be a loud conversation around not only the conflict the government now has with the Bank of England, but also whether the government has got the UK on the right path.

Can we rule out further sterling weakness? For now, we definitely cannot as the currency markets react to the unfolding of this ever changing situation.

As well as the Liz Truss speech, we could expect other comments from government or MP’s this week, any of which might influence sentiment towards the pound.

We also have a whole host of new economic data as it is the beginning of a new month. A key piece of news this week will be the latest ‘US Non-Farm Payroll’ data, and unemployment report.

The US dollar has a big influence on the pound and also the Euro, and movements on the back of this news can influence EURUSD rates, which in turn often affect GBPEUR and GBPUSD levels.

Are you planning any currency purchases in October, buying or selling the pound? Will the pound weaken in October is a very valid question, and we can share with you the latest news and sentiment to help with any decision making over your FX payments.

For more information and to discuss strategy for any transactions you are considering, please contact me Jonathan on [email protected]

Thank you for reading and we look forward to hearing from you.

 

 

 

 

Has the pound recovered? BoE announce emergency intervention

A Rollarcoaster Week for GBP EUR - Weekly Review June 18th 

The pound and UK financial markets have been in turmoil over the last few days following the governments mini-budget announcement on Friday, where they pledged to cut taxes by billions of pounds. The budget is un-costed and will have to be debt-financed to cover the cost of the cuts.

Monday’s session, saw cable (GBPUSD) drop to all-time lows, with GBPEUR rates hitting 2-year lows at the worst point of trading. The pound recovered throughout the day yesterday, and at one point was 1.5% up against the dollar. Some of these gains have been lost overnight.

Yesterday, the Bank of England announced that they would intervene in the government bonds market to stabilise a collapse in the price of bonds. They said the decision to buy government bonds was caused by ‘a material risk to UK financial stability’. The pound fell initially post announcement before recovering close to levels seen at the start of the day.

A weaker pound increases the cost of imports of services and goods. Businesses will ultimately have to pass on the increase in cost to consumers which will further fuel inflation. The Bank of England are under pressure to keep inflation under control and protect the value of the pound.

On Monday, the bank confirmed they stand ready to tackle inflation with all tools available but will not hold an emergency monetary policy meeting. The next meeting is set for 3rd November. Markets are now beginning to expect a ‘super hike’ from the bank, meaning they may raise by more than 1% or 100 basis points.

There is now a serious risk that the UK is going to face a deeper and longer recession than expected which would be negative for sterling. If the bank does announce a ‘super hike’ in November, then interest rates in the UK will have risen far sharper than expected even a few months ago.

The increase in the cost of borrowing will drive up mortgage prices for everyday Britons. Household disposable income will therefore decrease as people pay more cover their rising mortgage and energy bills. As disposable income decreases so does the amount of money being spent in the economy, and this will negatively impact growth.

GBPEUR hit 1.05 the last time the UK was in a recession. £200,000 now buys €12,400 less than a month ago. If the pound were to drop to 1.05. £200,000 would buy €13,000 euros less than today.

Labour leader Keir Starmer and even some Tory MP’s are calling for the budget announcement to be reversed. This would be a spectacular U-turn for the Truss government and is not expected. However, a reversal in policy would likely hand aid to a struggling pound.

If you have any upcoming requirement involving the pound and would like some assistance, do feel free to reach out to me directly at [email protected]. There are several tools available that can help protect you from currency risk and help build a payment strategy that works for you.

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