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The pound tumbled against the majority of currencies yesterday morning in a delayed reaction after Prime Minister Theresa May was given the go-ahead to trigger Article 50 late Monday evening. May said her Brexit bill will become law in the “coming days” and she is back on track to start divorce talks by the end of March.
Both houses backed the Brexit bill and after securing symbolic approval from the Queen, May has the right to begin the most complex negotiations since World War Two.
“We are now on the threshold of the most important negotiation for our country in a generation,” Brexit minister David Davis said in a statement after parliament approved the legislation.
As a result, we saw the pound lose ground against the euro and US dollar early yesterday morning. It seemed the news had a slightly delayed reaction as investors had been reluctant to sell the pound during the Asian trading hours as markets were quiet before the Federal Reserve policy decision. As we have seen in recent sessions, the pound spent the rest of the day clawing back what it had lost throughout the morning. You can see the past 24 hours for GBP/EUR and GBP/USD on the graphs below.
GBP/EUR exchange rate graph
GBP/USD exchange rate graph
US FOMC meeting
All eyes will be on the US this evening as they are set to raise interest rates for the second time in four months. In theory a rate rise should increase the value of the US dollar due to the higher return on investor funds. However, today’s hike has been widely anticipated for a couple of weeks now and so it is likely already been priced into the markets. The rate decision is then followed by the FOMC press conference, if Chair Yellen is positive over the pace in which the US is raising rates and over future hikes we could see the dollar strengthen against its counterparts.
What does this mean to you?
When looking to purchase an overseas property the exchange rates can play a huge part in what you can afford to buy. With the increasing uncertainty it’s imperative to keep in touch with an account manager at Foremost Currency Group. We can act as your eyes and ears on the currency markets and not only can we source a rate of exchange that can be far better than your bank but also help you with the timing of your trade and therefore make the most of your currency transaction. Get in contact on the details below for a no obligation discussion with one of our expert currency brokers.
A busier day for economic data. The UK has their Average Earnings Index, Claimant Count Change and Unemployment Rate. As all measure labour market conditions, investors will be watching these figures closely as they are an important indicator of the overall economic health. As mentioned previously the main announcement today will be the US interest rate decision and press conference around 6pm UK time.
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