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Market update - sterling rallies

Sterling rallies following several surprise announcements

By HiFX   /     Nov 03, 2016  /     Market Updates  /     , , , , , , , , , , , ,

The Pound has been struggling ever since the vote to leave the EU in June, and in October it became the world’s worst performing major currency due to speculation that the government is heading towards a hard Brexit. However, a number of surprise events over the last couple of days have given Sterling an unexpected boost, meaning it rose almost 2% against the Euro and 1.5% against the US Dollar.

1st November: Carney announcement calms the markets

On Tuesday morning, Mark Carney announced that he plans to stay on as governor of the Bank of England until the end of June 2019. Crucially, this offers some consistency throughout the process of the UK leaving the EU, which is currently expected to be completed by March 2019.

Carney said that, “By taking my term in office beyond the expected period of the Article 50 process, this should help contribute to securing an orderly transition to the UK’s new relationship with Europe.”

2nd November: Tightening polls spook US investors

On Wednesday, the Pound rose against the Dollar following the release of a Washington Post-ABC News tracking poll, which showed Donald Trump with a one-point lead over Hillary Clinton. While the polls have been tight throughout the election race, Clinton has maintained at least a small lead since March. But after the FBI reopened its investigation into her usage of a private server, the result has become less certain.

As we have previously discussed, Trump is an unknown quantity in US politics, which makes markets nervous. The change in polling caused the Dollar to weaken as investors decided to move their money elsewhere and provided another welcome boost to the Pound.

3rd November: High Court rules against May on triggering Article 50

There have been a number of legal challenges around the way Theresa May is approaching the Brexit process. Today, one of these has been successful and the High Court have judged that the approval of Parliament is required in order to trigger Article 50.

The long term situation remains unclear as the government has confirmed it intends to appeal this decision. But anything that stands in the way of Article 50 being triggered is seen as positive for Sterling, as the likelihood of us remaining in the EU – whether permanently or at least for longer than expected – has increased.

Following the announcement, Sterling rose to a three-week high against the Dollar and also gained against the Euro.

3rd November: Bank of England raises 2017 UK growth forecasts

The Bank of England’s Monetary Policy Committee announced today that they have voted unanimously to keep interest rates on hold. They also upgraded their growth forecast for the year from 2% to 2.2%, and next year from 0.8% to 1.4%, as well as raising their inflation forecast.

There had been some uncertainty around whether the committee would choose to cut interest rates again in the coming months. However, today’s growth and inflation forecasts makes this scenario seem much less likely, which is more positive news for Sterling.

What does this mean for me?

While the Pound has generally been struggling over the last few months, recent events have shown that there are still opportunities to take advantage of spikes in its value as markets react to each breaking development. However, events can move very quickly so it is a good idea to have an action plan for when they happen as it is never clear how long a rally will last.

If you’d like to keep an eye on exchange rates, we can help you. On our Marketwatch page, you can watch the market trends or sign up for daily rate alerts on a range of our most popular currencies. Or with a HiFX account, you will also have the option to set up personalised rate alerts, which will let you know when your target currency hits your desired rate.

If you spot a favourable rate, there are a couple of ways you can take advantage of it. If you have set up a HiFX account, you can transfer money 24 hours a day, 7 days a week through our online platform. Alternatively, you can lock in the rate using either a forward contract or by using our regular payments service. Both of these enable you to fix exchange rates for up to two years into the future for either one-off or regular international payments. Call our friendly team of experts on 01753 859 159 to discuss your options.

Whatever happens next, HiFX will be here to help you with your international money transfers. If you’d like to discuss your personal situation with us in more detail, please contact us.

 

The details expressed in this transmission and accompanying documents are for information purposes only and are not intended as a solicitation for funds or a recommendation to trade. HiFX Europe Limited accepts no liability whatsoever for any loss or damages suffered through any act or omission taken as a result of reading or interpreting any of the above information. HiFX Europe Limited is authorised by the Financial Conduct Authority under the Payment Services Regulations 2009, registration 462444, for the provision of payment services. HiFX Europe Limited is a registered MSB with HM Revenue & Customs – Reg No: 12131222. HiFX is a limited company registered in England and Wales. Registered number: 3517451. Registered office: Maxis 1, Western Road, Bracknell, Berkshire, RG12 1RT

 

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