Following the resignation of Theresa May, the poll to find the next leader of the Conservative Party has become the search for a new Prime Minister. Whoever takes residence at Number 10, Brexit is going to be top of the list of priorities, and the change in leadership may have an effect on the value of the pound.
Why does the change in PM have an impact on sterling?
Currencies are often put under pressure in times of uncertainty, becoming more volatile in the run-up to a general election, for example. Brexit is causing considerable political uncertainty and the additional complication of a search for a new PM is piling on the pressure. The change at the top has caused an unavoidable delay in the Brexit process as a new leader is found and while the result isn’t due until July, the clock continues to run down to the 31st October deadline. A different leader may take a very different approach to Theresa May, which may increase the likelihood of a no-deal Brexit, a second referendum or even another general election. Boris Johnson has emerged as the current favourite but sometimes appears a little too cavalier at the prospect of a no-deal or disorderly Brexit, which is causing sterling some difficulties as the market responds to the possibility by pricing the pound lower.
What happens next?
Now the Conservative Party has whittled the candidates down to the final two, a postal vote will take place between polling members of the party. The results are due to be announced in the week of the 22nd July, and this is around the same time as parliamentary recess normally begins. This means that a new PM could be in office for nearly two months before having to face any test from parliament. It also means that any progress on Brexit will be on the back burner until August. This isn’t good news for sterling, as it extends to the period of uncertainty and leaves precious little time to negotiate with the EU and vote through any amendments to the deal, or plan for the no deal scenario. The challenge is that this situation is largely unprecedented, and it will feel like a long wait for a clearer picture to emerge. This makes it hard to predict how the pound will react over the summer; it is likely to be vulnerable to rumours about the progress of Brexit and the market may look elsewhere at economic statistics. However, businesses and consumers may be holding their breath and waiting for progress on Brexit, so there’s no guarantee that PMI numbers or confidence measures will provide a positive boost to sterling.
How do I manage my international payments in a volatile currency market?
The Conservative Party leadership race adds a further wrinkle to the already frustrated Brexit process. The outcome is almost impossible to predict but as currency experts, the moneycorp team watch the developments closely and provide guidance based on our understanding of the market.
We know that as a general rule, currencies fluctuate less during periods of certainty and are more volatile during moments of political change. That may not seem like there’s any good news for sterling in the immediate future, but there are ways to manage your currency costs.
As currency specialists, moneycorp provide our clients with access to a wealth of currency tools which help our clients manage their currency risk and make payments overseas. As well as tools to track, target and even fix an exchange rate, our clients can access to great rates, make payments with low transfer fees and manage their international payments over the phone from a UK call centre, online and via our mobile app. We’ve teamed up with Savings Champion to make sure that even in an uncertain times, you can make the most of your money overseas.
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