2018 foreign exchange: What will the next 12 months mean for investors?

Our trusted specialist partner, Argentex, considers 2018 foreign exchange, and how 2017 has fared:

It’s been a turbulent year for the UK, with Brexit dominating the headlines, boring us to death with speculation without any real basis.

What is clear however is that the UK, with all of its pre-Brexit optimism, has been on the back foot the entirety of this year. David Davis and Theresa May have been putting a brave face on things but haven’t quite masked the obvious fact that every attempt to move things along has been thwarted by Michael Barnier and his team.

Whilst this has been hanging over the UK like a dark cloud, the Euro zone has shown that Brexit is rather far down their priority list. They’ve outperformed the UK by a mile in terms of growth (both services and manufacturing are up, as well as record levels of new employees across the Eurozone). In addition, the French and German elections this year have taken up a lot of attention with Macron spearheading the movement for a more integrated European Union without us.

So, is there a light at the end of the tunnel for the UK?

Jeremy Corbyn seems to think so. The Labour Party are confident that they could succeed the Tories within the next 12 months, putting Corbyn at the country’s helm. If this were to happen, it is likely that we would see a sharp fall in the Pound given his strong views on business and taxes, it’s thought that many companies would seek to move their headquarters overseas.

Even without a government overhaul, it will be a surprise if Theresa May makes it through the year with a vote of no confidence looking more and more likely. Who would proceed her? Would they be able to handle the negotiations any better?

Outside of the UK there are some major events that are likely to feature in the press with plenty of market moving potential. Over in the US it’s looking like we will see Trump’s tax plan implemented sooner rather than later. This has huge implications for both the US and Europe.

With the corporation tax being cut from 35% to 20% suddenly the US is looking like a much more appealing place to do business. It’s likely that we’ll see a huge flow of funds into the US which would see the Dollar strengthen and create weakness in its major currency pairs. In addition, if we see European companies relocating their headquarters to the US, the effect on the Euro and Sterling could be dramatic.

Of course, those reading this may be concerned about their plans to buy a property overseas next year. At Argentex our job is to work with our private clients to help plan and prepare for any downside that may affect their property price.

Although there are of course many potentially negative events for The Pound next year, there’s also a potential upside with decisions being made with the EU as well as striking up new trading conversations with countries outside of Brussels. It is our job to follow the markets closely on our clients’ behalf and help time their transactions effectively.

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