Another year and once again politics has the potential to drastically change the value of your purchases abroad, unless you lock in your currency with a forward contract.
Just as European politics – in the shape of Brexit – was set to decrease in importance to the value of the pound in 2020, now international tensions from the US assassination of the Iranian general will be affecting the market. Or will they?
The normal effect of such an event would be to increase oil prices, which has happened, and thus weaken the pound. It also means that international investors seek ‘safe havens’ – thus we have seen the price of gold increase rapidly in recent days – or safe haven currencies such as the yen or the US dollar. We are waiting to see what develops around this issue.
On the other hand, the pound could be expected to respond well as we move closer to leaving the European Union on 31st January. Evidence that the process is working smoothly will probably bolster the pound. There is also a sense that as we have more certainty on Brexit in 2020, some of the cash that companies stored in case of a no-deal Brexit will be spent and invested. Thus we could see an economic boost, supported by a higher-spending Budget next month.
For many of us, events in the Middle East and in Iran-US relations seem a long way away, as we focus on our own plans for 2020. To discuss how you can move ahead with your plans, do call your trader on 020 8108 5337.
