Can Sterling beat the bears in June?

Will Sterling’s Fortunes Improve in June?

The British Pound has weakened sharply against a host of currencies in May thanks to delayed Bank of England interest rate rises and growing concerns over the state of Brexit negotiations; Sterling is currently over 2.5% down against the US Dollar, 2.8% against the Australian Dollar and just over 3.5% against the Yen. The only bright spot for the Pound is against the Euro where the exchange rate remains relatively stable and as we approach month-end the market is currently seeing some small gains.

Of late Brexit negotiations have sought to focus on the future customs relationship; and the UK has found little leeway from the European side of the table which suggests to some commentators that the risks of the UK walking away from the table have grown. But, it's not just Brexit that has currency watchers warning Sterling will struggle over the near-term, the economy and expectations for future rises in the Bank of England's base interest rate could weigh too.

Analysts are expecting continued surprises in the month of June similar to the surprises back in April. There was widespread agreement that April tends to be a positive month for the Pound on the basis of favourable seasonal trends and that it has risen each April for the past decade. However, Sterling fell in April 2018. June sees the European Council meeting on 28thand 29thJune which is seen as an unofficial deadline for the current round of Brexit negotiations to deliver progress. What the negotiating process has taught us to date is that the EU and UK have a habit of getting their act together before these key events, and therefore some good news on progress might just emerge in the run-up to the event.

There is no significant data releases of note.

 Andrew Thomas, FX Dealer

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