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Weekly roundup: Pound undermined by Brexit customs union confusion

currency-newsWeekly roundup: Pound undermined by Brexit customs union confusion
The pound tumbled against the majority of its peers again last week as growing Brexit uncertainty cast a long shadow over the currency.

It wasn’t all doom and gloom for the pound last week however, with Sterling able to tick higher in the first half of the week following the publication of the UK’s latest labour report.

The report was welcomed by investors thanks to a stronger-than-expected rise in employment growth, and an uptick in basic pay.

It was this rise in wages that appeared to be the main source of the pound’s strength at the start of last week, with figures revealing that wages outpaced inflation for the first three months of 2018, signalling the end to the year-long pay squeeze which has dragged on consumer spending.

However GBP investors had little time to rejoice as the pound quickly fell back in the latter half of the week amid rising confusion over the UK government’s position on the whether to remain within the EU customs union.

This was sparked on Thursday by Theresa May’s dismissal of a report suggesting the UK would remain within the customs union past the transitional period.

However this appeared to conflict with later suggestions the government would accept a ‘backstop’ agreement to remain in the customs union if a solution for the Irish border could not be found.

This increased Brexit uncertainty and saw investors choose to steer clear, leaving the pound to end the week lower.

Looking ahead, Sterling sentiment could rally this week if the UK’s latest CPI figures, reveal inflationary pressure began to build again last month.

This could prompt renewed hopes of the Bank of England raising interest rates later in the year and help the pound stave off any further losses.  
 
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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