As we enter the last full week of the UK’s membership of the European Union, the Chancellor’s speech to the Financial Times at the weekend has made it clear that we are no longer being run by a broadly pro-Remain cabinet any more. Sajid Javid said the UK would not be seeking to be aligned with European rules any more, and business would just have to deal with that.
Combined with the threat to send the House of Lords north – enjoyable though it will be to see the 800-or-so Lords having to trek up to Birmingham or York to claim their £305 daily attendance allowance – you can see that we’re in a “move fast and break things” era. A major cabinet reshuffle is expected immediately after we leave the EU next week, and it will be fascinating to see who stays and who goes.
As well as the politics, there’s the economics, and we had a dose of bad data last week, with inflation too low and retail sales for December disappointing. This week will be pivotal for sterling. There are a number of important data releases, mainly unemployment and wage growth figures tomorrow and services and manufacturing PMI on Friday. The extra importance of these is that they will guide the Bank of England’s Monetary Policy Committee before next week’s interest rate decision. The increasing likelihood seems to be that rates could be cut from 0.75% to 0.50%.
The threats to sterling seem myriad, but I wouldn’t bet on anything. Have you read our latest quarterly forecast? It gives an outstandingly readable and clear-sighted view of the risks to GBP, EUR, USD and several other major currencies, even if I do say so myself… Download it here.
It also provides an excellent primer for when you come to discuss your own strategy for a major transaction abroad. Our recommended strategy is safety first; decide how much you need to fulfil your plans abroad and then fix the rate that allows that, removing the risk that sterling moves against you.
Please call you trader on 020 8108 5337.
