August can sometimes be a quiet time for currency markets because the political factors that influence currency values are on hold due to summer breaks. This has not been the case for the pound because the shadow of Brexit loomed large.
Mid-month, economic data meant that the pound was given some assistance and there was some optimism over Brexit after the leaders of Germany and France apparently intimated that Boris Johnson had 30 days to find an alternative to the Irish Backstop. The prospect of an end to the uncertainty saw the pound rise, but throughout the month, gathering fears over the UK leaving the EU without a deal, put the pound under pressure.
As well as the rhetoric indicating the likelihood of no-deal, the PM’s decision to suspend parliament to push Brexit through was a cause for concern within the markets. In addition, the prospect of an imminent general election was added to the mix. Parliament may have ruled that out in favour of focussing on Brexit, but the issue remains a possibility for the short term. The return of parliament could have meant that some progress was made on the Brexit issue and the pound rose in anticipation, but dramatic losses for the Prime Minister and the loss of the Conservative majority means that the situation has become even more uncertain.
However, it’s not all bad news for the pound. The House of Commons legislation aimed to prevent a no-deal Brexit gave sterling a boost. In addition, a less pessimistic statement from Bank of England governor Mark Carney during the inflation report was considered positive. The governor told the committee that "the impact of a no-deal Brexit would be less severe than first thought" as a result of preparations for a disorderly departure. He also said there were almost no circumstances in which the bank would intervene to affect sterling's exchange rate. Dr Carney's words contributed to a successful day for the pound. It strengthened by an average of 0.7%, adding one yen, three quarters of a euro cent and more than one and a third US cents.
The pound is volatile due to the ongoing Brexit uncertainty and the fast pace of political developments is making the market very difficult to predict. If you have international payments to make, you may find it challenging to decide the best time to exchange funds. We've teamed up with Savings Champion to provide access to a wealth of specialist currency services that help people make the most of their money overseas and mitigate currency risk. As well as tools to track, target and even fix an exchange rate, moneycorp clients can access great rates, make payments with low transfer fees and manage their international payments over the phone from a UK call centre with award-winning customer service as well as online and via a mobile app. You can’t control fluctuations in the currency market or the outcome of Brexit, but a currency specialist like moneycorp can help you make the most of your money.
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