Over the last two weeks, we have seen the pound fall by around 3.5% against most major currencies, this has been due to both weak economic data, and a loss of confidence from investors as the date approaches for Theresa May to trigger Article 50. Before this can be done, there is one final hurdle for the UK Government. On Monday the House of Commons will be debating the recent amendments made by the House of Lords to the Brexit Bill, these amendments include giving EU nationals rights, and MP's getting the final vote on the Brexit deal. MP's have been advised by Brexit Secretary, David Davis to leave the bill unchanged so the UK can trigger Article 50 and finally get the ball rolling.
As we get closer and closer to the event of Article 50 being triggered, the pound has continued to lose value, and we are seeing Friday afternoon sell-offs again as investors do not feel comfortable leaving their positions in sterling in over the weekends. Just to clarify, 100,000 euro is costing £3,500 more than it did 2 weeks ago.
As far as this week is concerned, the main event really is Article 50. Many of you are probably aware that the market sentiment is that the pound will fall in value once it has been triggered as it will signify the beginning of an uncertain period of negotiations between the EU & UK. Though this is not a guarantee, I do feel it is important to make sure that you have hedged yourself accordingly using tools such as stop losses, limit orders and forward contracts.
The second most important event is also on Wednesday, and this will be the Fed interest rate decision. For those of you who keep an eye on the GBP/USD exchange rate, you'll know that we have fallen from 1.25 down to 1.21 in the short space of a week due to recent comments made by Fed officials, signalling that there is a big chance of an interest rate hike in March. The expectation is that they will do a hike of 0.25% to bring their interest rate up to 1%. We are not expecting a massive market reaction to this as it is pretty much priced in, but I will be watching to see if they signal any further hikes for this year, as this will determine the strength of the U.S dollar moving forward.
If you have a currency purchase coming up and are concerned about the above events, please don't hesitate to contact me for further analysis.