Pound stabilises after Article 50

The UK is officially on the road to Brexit. After all the build-up, the impact of the activation of Article 50 on the currency market was rather muted.

GBP/EUR actually gained slightly on the euro, rising from €1.1479 to €1.1553, while GBP/USD clung to the $1.2424 level. Sterling failed to hold its own against the commodity currencies however, with GBP racking up a hat trick of losses against CAD, AUD and NZD. The pound lost around a cent against all three currencies.

So, now Article 50 has been activated what can we expect from the currency market? Keep reading to find out…

What’s been happening?

Yesterday all eyes were on the UK and a moment over nine months in the making – the activation of Article 50.

While the pound initially declined after Prime Minister Theresa May signed the letter that would kick start two years of intensive Brexit negotiations, the currency later recovered ground against currencies like the euro and US dollar.

The tone of May’s letter and the speech she offered up in the wake of its delivery lent the pound support, with the PM proclaiming that she would be seeking a special relationship with the EU.

May stated; ‘The Article 50 process is now underway. And in accordance with the wishes of the British People, the United Kingdom is leaving the European Union.

This is an historic moment from which there can be no turning back. Britain is leaving the European Union. We are going to make our own decisions and our own laws.’

What’s coming up?

The only pieces of UK data on the calendar for today, the GfK consumer confidence index and Lloyds business barometer, aren’t due out until late evening, so pound movement is more likely to result from any Brexit related news.

The GBP/EUR exchange rate could also fluctuate in response to Germany’s latest inflation figures. A slowdown in the pace of consumer price pressures in the Eurozone’s largest economy could reduce the odds of a European Central Bank (ECB) interest rate hike taking place in 2017, giving the pound a chance to gain on the euro.

Economists have forecast that annual inflation eased from 2.2% to 1.8% in March.

There are also a few US reports on the horizon. If the nation’s annualised Q4 GDP figure shows the acceleration in growth expected, the pound could move further away from its recent highs against the US dollar.

However, demand for the pound could fall before Friday if the GfK consumer confidence survey confirms forecasts for a dip in sentiment.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Phil McHugh,
Trading Floor Manager

Phil looks after our large corporate clients, providing dealing and hedging services whilst also helping to manage Currencies Direct overall market exposure.