We Take No Pleasure In Being Right
Last Thursday, the Heritage Pay team broke with tradition by producing this Weekly Market Commentary a day earlier because of the impending election. Furthermore, we took the unusual step of making a prediction on the exchange rate based on different electoral outcomes.
And we were right. Unfortunately. Sterling is weaker today, than it was before the exit poll result was announced.
Most of our clients are based in the UK. And it is through our clients' lens that our perspective of what is good (or not) for the Sterling is shaped. So we take no pleasure in being right, about our prediction of the impact of a Boris Johnson win, on the value of the Pound.
The Conservatives’ 80-seat majority in the new Parliament means the country is on course to leave the EU on 31 January. At the time of going to print, legislation proposed by the government, outlawing an extension to the Transition Period, had just gone before Parliament. It is guaranteed to pass. There is uncertainty, however, on whether a new trade agreement with the EU can be negotiated during the Transition Period which due to expire at the end of 2020.
For Sterling analysts, focus remains on the passage of the Withdrawal Agreement Bill when Parliament returns from its recess in the New Year (7 Jan). The Bank of England downgraded its estimate for Q4 GDP growth to 0.1%q/q, but acknowledged that business and consumer confidence could pick up in the near term. IHS Markit will release its final estimate of December manufacturing PMI (2 Jan), with the flash estimate having shown a fall to 47.4, weighed down by lower output and orders components.
With monetary policy close to its limits across major advanced economies, including the UK, there is now increasing consensus that fiscal policy will have to play a bigger role in the coming years both to counter any future economic downturn and to meet the longer-term challenge of raising productivity growth and therefore sustained economic growth.
To discuss how the above may affect your money transfer requirements, please contact your Currency Dealer at Heritage Pay on +44 (0) 203 858 7274.
See you next week!
None of the information in this article is, nor should be construed as financial advice. All foreign exchange transactions involve risk and you should always seek your own independent financial advice before entering into any foreign exchange transaction.