Parliament’s takeover of the Brexit timetable boosts sterling
If you are looking to move sterling to euros or US dollars, then the recent falls in the pound on the back of current political turmoil have made it hard to decide exactly when to make that trade. But the latest moves in Britain’s political system have bolstered sterling, giving some respite to the recent significant falls, and you now can benefit from better rates than we have seen in some weeks.
The benefit to customers and businesses is considerable, presenting some good savings if you or your business need to make international money transfers to the US or Eurozone countries. For example, based on US$100,000 being paid to the US, if you had made that payment on September 2 when £1 would have bought you US$1.2070, it would have cost you £82,850, based off market rates alone. Making that same transaction at US$1.2207 which was how much the pound was worth against the US dollar at the time of writing, would have cost you £81,920 – £930 less in just two days.
It is a similar picture for any euro trades you might need to make. On August 11, the pound was worth €1.0641 while by September 3 it had rallied to €1.1028. A similar €100,000 payment to the Eurozone would have cost you £93,976 on August 11, but £90,678 on September 3 – saving you £3,297 in a matter of weeks.
There is major uncertainty about where the pound will go next as we wait to hear for sure if the UK is heading for a General Election. So, if you or your business cannot afford to take risks based on currency volatility, it may be worth considering fixing the rate you can get for any sterling transactions given the benefits on offer currently.
Alternatively, as there could yet be more good news for sterling, you could target a rate at a level you would be happy to trade at on the basis that the pound could strengthen further if the political turmoil diminishes. But this would depend on your individual circumstances. You can discuss this with one of our currency specialists who can help you decide on the best course of action for you or your business.
If you would like to get in touch with our global currency experts, please call +44 207 614 4194 or email us on customer.service@ofx.com. Now more ever, this is the time an OFX currency expert can help you make informed decisions at the right time, so you can make the best of market volatility.
Why is the pound on the rise?
The UK Government has been rendered impotent by a rebellion of its own Conservative MPs in the Commons this week, which has resulted in Parliament taking control of the Brexit process with a draft law preventing a no deal passing through the House in a single day on Wednesday.
Anticipated resistance to this passing through the House of Lords had dissolved by Thursday morning, and it is expected to be passed by 1700 tomorrow as the Government withdraws its opposition to the bill. Any amendments need to be heard again in the Commons, but it could be given Royal Assent within the next few days.
The move is the latest in a turbulent week in Parliament, which has seen Prime Minister Boris Johnson, after a series of defeats in just a few days, lose his majority in the House when Philip Lee crossed the floor to join the Liberal Democrats and any ability to dictate Parliamentary process. It prompted him to put forward a motion to call a snap General Election, but to succeed this, he needs a two-thirds majority in the House. While he won that vote, it was not by a significant enough margin.
Opposition MPs have said they will not back an election until it is enshrined in law that Britain will not leave Europe without a deal, so expect a General Election to be back on the table very soon.
The timetable for Parliament to deal with these issues has been accelerated after Mr Johnson asked the Queen to prorogue – or suspend – Parliament from a date between September 9 to 12 until mid-October. There are still legal challenges to this, the latest of which is being heard in the High Court this afternoon with a judgement expected around 5 pm, and yet another in the Scottish courts in Edinburgh.
Depending on the outcome, we could see some more significant moves in sterling, as the uncertainty of what is happening in the UK starts to be resolved.
While the political upheaval has hit sterling and been damaging for those sending money abroad, any good news coming out of the process will see a sharp rise in the pound, so it is important for anyone looking to move money to keep a close eye on the news and consequent impact on currency.
However, these are fast-moving events – for example, after the planned prorogation was announced, the pound reacted by falling from US$1.23 to a low of US$1.2155 in around 45 minutes. It rallied towards the end of the day but had fallen further at the start of this week on the prospect of a General Election, then bounced to US$1.2207 at the time of writing.
So, this is the time a currency expert working on your behalf can help you make the right decision at the right time to make the best of the current volatility.
OFX has currency experts worldwide, so you’ll always be able to ask questions or discuss your currency requirements with someone 24/7 no matter where you live.
IMPORTANT: The contents of this blog do not constitute financial advice and are provided for general information purposes only without taking into account the investment objectives, financial situation and particular needs of any particular person. UKForex Limited (trading as “OFX”) and its affiliates make no recommendation as to the merits of any financial strategy or product referred to in the blog. OFX makes no warranty, express or implied, concerning the suitability, completeness, quality or exactness of the information and models provided in this blog.
