The pound is struggling. Like a bull carrying around its own china shop, it seems destined to crash into self-created obstacles at every turn.
Reasons for the decline in sterling are both data and sentiment driven. Brexit still weighs heavily on the pound, and together with a decidedly mixed bag of economic results, sterling doesn’t seem to have much support at present. Despite this, there is a glimmer of positivity with the recent news that consumer protections will remain in place when the UK leaves the EU, which has been described as a ‘significant improvement’ on recent negotiations.
There has also been further scrutiny on interest rates in the UK, and there has been a split in sentiment between the Bank of England policy makers. Those favouring a hike in interest rates, in order to offset inflationary pressures in the UK, are against those who fear that a slowdown in consumer spending, as households are hit by a double whammy of rising prices and sluggish wage growth.
We expect the next few months to be event driven, with global political issues coming to the fore. Donald Trump’s ongoing attempts to bring the world to the brink of nuclear war using his tiny hands and his iPhone (other models are available), North Korea’s sabre rattling, and Qatar’s sanctions will all affect the currency markets. With increased volatility, and some banks calling sterling euro under parity, we are helping Enness clients hedge their requirement through the use of forward contracts. These contracts allow our clients to protect a currency level for up to two years, thus eliminating the risk of the cost of an overseas property spiraling out of control if the exchange rate erodes.
If you have FX requirements and wish to speak to someone about your options in the current climate, speak to Enness who will be able to refer you to one of our expert FX brokers.