Mrs May has messed up and lost the previously held majority in the House of Commons. The shortfall now means a reliance on the 10 MP’s of the right wing ultra-conservatism of the Democratic Unionist Party. You would have to have been hiding under a stone to have missed the fallout of last week and many, including Mrs May, might wish they were enjoying the protection of some form of shade.

Sadly, none now exists and where we were anticipating a “strong and stable” Conservative government, capable of pushing through a hard Brexit, the now painful glare of the political sun beams through and highlights the good, the bad and the reshuffled Cabinet. We look much more likely to go soft on Brexit now as a consequence.

GBP/USD

There are expectations of a US interest rate increase, possibly this week, although the market is likely to have anticipated this, if it happens. Contrary to President Trump’s Twitter based claims, the US economy may be losing momentum with weakening wage growth and employment numbers. Despite this, since just before the exit polls of the Election last week, GBP has lost nearly 2% against USD value and as I write this the slippery slope down appears to continue.

If you are buying GBP you may wish to set a market order to take advantage of moves to USD favour. Relative to where it might go to, if you are planning on buying USD you may not yet be too late to fix forward contracts to guarantee the rate of exchange later in the year.

 The following graph depicts last week’s GBP/USD moves:

GBP/USD moves

GBP/EUR

Thursday is the day to watch this week for Euro value. The Eurozone has enjoyed a generous trade surplus thanks to German exports (EUR23.1 billion was seen in March). We now get the data for April which is projected to show 22.4 billion. This will be a telling factor when the Eurozone finance ministers gather in the afternoon and Greece returns to top the agenda. It’s a thorny topic the Germans may wish to postpone until after their elections in September but it will be nothing more than a delay of the inevitable and could be the Achilles Heel for EUR value later in the year.

In relative currency value terms we believe that softer Brexit terms will mean less short term damage to both the economy and the value of GBP. The harder we Brexit, the harder we fall. Anyone selling GBP may wish to seriously consider fixing forward rates now, in anticipation of any further decrease in value due in the near future from the uncertainty generated by the forthcoming negotiations. Please contact us to discuss this as soon as you are able.

The following graph depicts last week’s GBP/EUR moves:

GBP/EUR moves

EUR/USD

Whilst GBP suffers against EUR due to Brexit uncertainty so too does the EUR suffer against USD. What hits GBP where it hurts has repercussions for EUR as collateral damage against USD value. Even with this in mind the EUR has made steady progress since mid-April and whilst it may be a relatively flat week for the currency pair we are ready to ensure that you enjoy excellent rates of exchange when exchanging on a spot basis. 

The following graph depicts last week’s EUR/USD moves:

EUR/USD moves

It only remains for us to wish you well for the coming week. Please do not hesitate to get in touch with us, we look forward to hearing from you.

Yours Sincerely

Damien Lipman