Unfortunately, it has been yet another bad week for the Pound- with GBPEUR going into the 1.06 area and GBPUSD hitting 1.20. This was largely due to the UK economy shrinking for the first time since 2012- data showed that the UK economy shrunk in Q2 of 2019. The whispers are that the UK could be on the brink of recession, with much attention now being paid to Boris Johnson and how he will handle Brexit, and then to the Bank Of England to see how they will react to this in regards to monetary policy.
Another reason for the added weakness in Sterling is that there is still a big lack of clarity around Brexit, and rumours of a General Election this year are growing, if we look back at the last election a couple of years ago, the trend is that Sterling could weaken more if more fuel is added to this rumour, or if it becomes fact.
GBPEUR is now trading at 1.0639 after 14 weeks of declining, it seems that selling pressure is still high and there is still room for GBPEUR to now reach 1.05 (Where there is major support) however if bad news continues then this could potentially go as low as 1.03.
As the UK Government is in recess until September, there is little chance that the Pound would strengthen through August, especially since last week’s GDP data, if we see any more poor readings then we could see further selling off on Sterling, even though politics are important, last week’s sell-off showed that the markets are still watching data heavily.
If you are watching these exchange rates and are unsure about how to navigate your situation- please don’t hesitate to get in touch.