Traders have warned of pound volatility if Scotland backs an independence bid. It is expected that the pound will suffer in the coming months if Nicola Sturgeon wins a landslide majority in next month's Holyrood election. Unless there is certainty that there will not be a second independence referendum, the British pound will be potentially under threat.

On 6th of May, Scotland will vote for the next Holyrood parliament and if there is strong result for pro-independence parties then more pressure will be placed on the UK government to grant Scotland the right for another independence referendum. SNP leader Nicola Sturgeon has already vowed to push for a second referendum and her demand will be strengthened if pro-independence parties win more than 50 percent of the vote.

While the pound has risen since a trade agreement was sealed with the EU, the ensuing political uncertainty following the May elections could mean that risk-averse investors will stay away from buying UK assets. Polls show the pro-referendum SNP party could win the vote, but, recently, there have been strong concerns about the party’s ability to secure a majority.

What currency analysts are saying?

A heavily pro-independence vote in next month’s Scottish Parliament election could mean a fall in Sterling as investors will avoid trading British stocks. Stephen Gallo, European head of currency strategy BMO Capital Markets, said: “Come early May the markets will wake up to this and probably trade the size of the majority or the end result. The stronger Nicola Sturgeon’s position is, the more headline risk there’s going to be over the next three to six months regarding this issue.” He also said that currency movement won’t be huge but a strong SNP will mean that Sterling will find it difficult to extend its rally. Goldman Sachs’ strategist, Sharon Bell said that a “prolonged period of political uncertainty, coming straight after 5 years of Brexit uncertainty, would be unlikely to encourage global investors back to UK stocks.” A second Scottish referendum will be risky, but UK stocks are still cheap after a disappointing performance due to Brexit.

What would happen if the SNP were to win the majority?

If the SNP win a majority, Sturgeon has said that her party will seek a second referendum, and this is the reason that analysts are concerned. In a recent briefing to its clients, Berenberg has noted that the Scottish parliamentary elections could result in a majority for parties supporting Scottish independence.

The SNP currently rules in a minority government, but polling suggests that it is on course to win a majority, increasing pressure on Boris Johnson’s government to accept another independence vote.

An Ipsos Mori poll for STV News this week predicted that 70 of Holyrood’s 129 MSPs will be from the SNP, which means that Sturgeon’s party will get an 11-seat majority. Alex Salmond’s Alba Party has failed to have any affect in the polls, but his party as well as the Greens also support holding a second referendum. Any combination of the above parties will result in a pro-independence majority.

"Such an outcome could make waves in markets and refuel worries about the UK’s prospects following Brexit – which has raised the tail risk that Scotland may one day leave the UK to re-enter the EU as an independent country," says Holger Schmieding, Chief Economist at Berenberg.

The results of the 2014 Scottish referendum and the 2016 Brexit referendum have highlighted how uncertainty can affect Sterling exchange rates. The pound fell following concerns about the outcome of the 2014 independence referendum but immediately rose after it was clear that Alex Salmond’s independence movement was defeated.

Are you Transferring Funds Abroad?

If you are a business transferring funds overseas, and are worried that sudden currency volatility could have a heavy impact on your funds, a currency specialist could save you time and money. Get in touch with Universal Partners FX and their dedicated team to discuss the latest market movements and plan ahead of your currency exchange. If you are paying your employees abroad, get in touch with Universal Partners FX to find out how much you can save in your international money transfers. Universal Partners FX can provide invaluable help on efficient risk management and tailored solutions to your business’ transfer needs.

Concerns about the Covid-19 pandemic are weighing on the markets and have impacted on global investor sentiment again, amid a surge in coronavirus cases in countries such as India and Japan. This has also pushed the value of Pound Sterling against the Euro and Dollar lower, confirming that global market sentiment will need to improve to boost the pound.

Yesterday, European markets also experienced their biggest fall this year, with airlines and hospitality firms severely affected. The pan-European Stoxx 600 lost 1.9% and the London FTSE 100 lost 2%.

The release of ONS data on Wednesday morning has done little to change things. UK consumer price index (CPI) data showed that the inflation rate rose to 0.7% in March 2021 from 0.4% in February. This is the first increase from fuel prices since February 2020 which helped drive the increase in March. UK CPI inflation rose by 0.3% m/m. However, in the long-term, increases in several of the producer price index (PPI) numbers signal potentially more inflation in the future which will be positive for GBP, as this will drive the Bank of England to tighten UK monetary policy.

Weaker pound

The pound is generally affected by global market sentiment and it traditionally benefits when the global economy is growing, and investor sentiment is positive. This is why declines in the stock market are reflected by similar declines in the pound. While positive economic releases can have a beneficial effect on the pound, the global conditions can overshadow such domestic data.

The pandemic has had a massive impact on the pound’s travails, and this is also what is happening right now as risk appetite has been under pressure with the number of Covid-19 infections rising in Asia. The WHO said that the number of cases has surged in all regions except Europe. In Japan, Tokyo and Osaka have asked the government to declare a state of emergency from 29th of April 29 to 9th of May 9.

FX analysts at Bank of America have said that “a pro-cyclical, risk-on environment should be GBP supportive as it will for other high beta currencies. What will see GBP standout is whether the UK can continue to attract investment inflows, which have been a hallmark of the recent appreciation."

UK Inflation Data

The release of inflation data has not influenced the pound, as investors are waiting to see how the country manages to move back to normality. Investors will be more interested in Friday’s release of PMI data for April, as it will offer a clear picture of how strong the rebound has been after reopening businesses on the 12th of April.

Wednesday’s release of inflation numbers showed that the annual CPI inflation rate has gone from 0.4% in February to 0.7% in March according to the ONS, and it was driven by a 0.3% month-on-month rise recorded in March.

"The UK has reached a turning point in its economic reaction to the pandemic where price growth is now on an upward trajectory, and should remain so for some time to come. Year-on-year consumer price growth slowed to 0.4% in February from 0.7% in January, primarily due to falling prices in clothing and footwear," Paul Craig, portfolio manager at Quilter Investors said. He added: "From here, inflation may tick markedly higher if the steady drip of consumer spending morphs into a waterfall as lockdown restrictions are lifted and households spend some of their accumulated pandemic savings.”

The UK will need a bit more time to recover and the economy to become more normalised until the Bank of England will consider raising interest rates. The Bank of England has stressed that the economy will need to reach pre-pandemic levels and the inflation target to be met, before it makes any move.

Are you Transferring Funds Abroad?

If you are a business transferring funds overseas, contacting a currency specialist could save you time and money. Get in touch with Universal Partners FX and their dedicated team to discuss these factors in further detail and be kept up to date with the latest market movements ahead of your currency exchange. If you are paying your employees abroad, get in touch with Universal Partners FX to find out how much you can save in your international money transfers. Universal Partners FX can provide invaluable help on efficient risk management and tailored solutions to your personal or business’ transfer needs.

Sterling strengthened as a result of a combination of factors including the reopening of businesses in April which helped support the pound at the start of the new week. April has been a typically good month for the pound with gains historically occurring in the second half of the month, and this could also be partly the reason. Foreign exchange strategists believe that this could be enough for the pound to continue trading well against the euro, especially with many economic data due to be released this week.

Economists and traders are expecting that this week’s economic releases will be proof that the UK economy is recovering as businesses reopen and the quick vaccination programme continues. With inflation coming out on Wednesday and the PMI survey for April out on Friday, markets are optimistic that the data will support the view that the UK is on track for a quick economic rebound. The PMIs are expected to show that economic activity is increasing as restrictions have been eased.

UK economic rebound

The pound has experienced a solid year, as investors speculated on a quick economic recovery due to growing confidence in the vaccine rollout programme. The UK economic outlook has improved the past few months as the successful vaccination programme supported a strong Sterling. Financial analysts and investors forecast that the UK economy will recover as more people are able to go out and spend money in retail shops. Already, there is an increase in shopping following the three-month lockdown, when on 12th of April non-essential stores reopened.

UK businesses report better than expected sales

With many UK businesses reopening, trading has increased as consumer demand was higher, and the reopening proved to be a success confirming that a strong rebound in the second quarter is possible. The ability of consumers to spend was also due to the government’s important furlough scheme which protected consumer income. From bank transactions to restaurant bookings and shop visits, it was evident that people were eager to spend when businesses reopened on 12th of April. Already, the first three days after the reopening, visits to retail and other shops increased instantly, pointing to a sharper recovery than initially expected.  

Consultancy Springboard’s statistics showed that footfall last week across all UK retail shops was 25 per cent lower than in the same week of 2019. However, the gap narrowed by more than half in a single week, reaching the level of trading after two months following the first lockdown. Retail parks was the major driver behind the surge, which was only 2 per cent down when compared with the 2019 level. Diane Wehrle, insights director at Springboard, described the first week of reopening as “an outstanding performance” for the UK retail sector and that with the reopening of indoor hospitality on 17th of May 17, “a further boost” to retail destinations is also to be expected.

Fable Data statistics also showed that spending in pubs and restaurants recovered to 42 per cent and reflected similar numbers in restaurant bookings tracked by Open Table. Government figures on public transport also showed that people were on the move, while vacancies also increased to pre-pandemic levels in April. Such measures showing people’s mobility, shopping and restaurant bookings are increasingly considered crucial indicators of the health of the economy and much more accurate when compared to official economic numbers. These near-real-time indicators reflect a more accurate picture of the economy as economists are hopeful that everything is going as well as could have been hoped.

Are you Transferring Funds Abroad?

If you are a business transferring funds overseas, contacting a currency specialist could save you time and money. Get in touch with Universal Partners FX and their dedicated team to discuss these factors in further detail and be kept up to date with the latest market movements ahead of your currency exchange. If you are paying your employees abroad, get in touch with Universal Partners FX to find out how much you can save in your international money transfers. Universal Partners FX can provide invaluable help on efficient risk management and tailored solutions to your personal or business’ transfer needs.

 

The British pound fell against the euro and US dollar, after the remarkable recovery it enjoyed during the first three months of the year. With the euphoria about the UK’s successful vaccination programme starting to wear off and a wider demand for the euro, the Sterling outlook is not looking as promising.

The pound performed very well against the euro in the opening quarter of 2021, but since February’s highs, it has dropped, suggesting that the Eurozone is performing comparatively better as the European coronavirus vaccination rates have increased. For many economists, further gains for the pound might prove to be difficult as most of the good news has already been priced in.

Bright Outlook for the Pound might be threatened

The UK economy managed to recover after a difficult 2020, as economists grew optimistic after the successful and rapid vaccine rollouts and the easing of the lockdown restrictions. The economy is expected to expand 5% this year, something that has boosted the pound the first quarter. The reopening of the economy has been now priced in, while the sell-off in UK government bonds, pushed yields higher and supported the pound. However, economists are questioning about how much higher the pound could possibly go. Foreign exchange analysts are warning that the UK is in a more difficult position than other economies due to the fact it was severely affected by the Covid-19 crisis earlier on, despite economic momentum accelerating. Additionally, there are worries about the potential impact of Brexit, with exports and imports with the EU having fallen dramatically in January.

The pound will find support if the UK manages to continue attracting investments such as cross-border mergers and acquisitions which are a significant part of the conditions required for continued growth.

Pound sensitive to BoE Andy Haldane’s departure

News that the Bank of England Chief Economist Andy Haldane would be leaving the Bank's Monetary Policy Committee has also affected the pound. One of the reasons was that Haldane was a hawk on the MPC, supporting higher interest rates and being optimistic about the UK economy. A hawkish central bank is linked to a solid and strong currency, and as such his departure was interpreted as a crucial factor in the pound’s weakness. His views on the economy were seen as vital for boosting the pound in February.

With Haldane leaving, the MPC may now react to any forthcoming inflation risks a little later, but markets will need to wait and see who the new chief economist will be and reassess the new policy changes. For other economists, Haldane’s departure might not have a long-lasting effect on Sterling as there weren’t any plans of tightening the BoE policy in the coming months anyway.

The recent declines of the pound might also be short-lived as some economists expect the pound to continue its outperformance, particularly against the Euro.

Are you Transferring Funds Abroad?

If you are a business transferring funds overseas, contacting a currency specialist could save you time and money. Get in touch with Universal Partners FX and their dedicated team to discuss these factors in further detail and be kept up to date with the latest market movements ahead of your currency exchange. If you are paying your employees abroad, get in touch with Universal Partners FX to find out how much you can save in your international money transfers. Universal Partners FX can provide invaluable help on efficient risk management and tailored solutions to your personal or business’ transfer needs.

If you are a business that has international suppliers, clients or employees, you will know that you will need to exchange your national currency for another one in order to make payments or convert income. These exchanges take place in the foreign exchange market.

The foreign exchange market, or Forex market, is widely considered to be one of the most liquid markets in the world, with more than $6 trillion being traded every day. Also known as the FX market, it is made up of a vast network of banks, commercial companies, investment firms, hedge funds, as well as retail investors and forex brokers. It is a global marketplace where people and institutions exchange one currency against another. The foreign exchange market is not controlled by a central bank or regulatory institution.

Understanding what forex is and how it works is essential when transferring funds overseas and especially if you are a professional trader trading in forex.

What does it mean exchanging or converting currencies?

When we talk about exchanging or converting currencies, we refer to the exchange rate, which is the price of one currency in relation to another one. It is the relative price of the specific two currencies or currency pair. A foreign exchange rate can be expressed as the number of units of the home or domestic currency per unit of the foreign currency. FX rates can also be quoted indirectly. If, for example, the exchange rate between the US dollar and the euro was on 20 July 2020 in Germany €0.900 and $1.110, then the first is a direct quotation and the second one an indirect one. This is because the first one is from the point of view of the domestic country of the euro.

Banks, foreign exchange companies, and international financial institutions provide forex services in exchange for a fee.

Foreign Currencies

There are more than 170 currencies around the world, but everyone knows that the most popular currency that dominates the markets is the US Dollar or USD. The EUR or euro is also a well-known and widely used major currency accepted in 19 countries of the European Union. The GBP, Sterling or British pound, the JPY or Japanese yen (JPY), the Australian dollar (AUD) or Aussie, the Canadian dollar (CAD) or Loonie are also important currencies that are exchange regularly and traded in the forex market. What are known as majors, are the below currency pairs which account for around 75% of forex trading: EUR/USD, USD/JPY, GBP/USD, AUD/USD, USD/CAD, USD/CHF and NZD/USD.

Transferring funds?

If you are making an international bank transfer, it is good to seriously consider a currency exchange company such as Universal Partners FX. Currency transfers with UPFX are usually faster, cheaper and equally secure than any bank. You can easily send funds abroad without any hassle and without too many intermediaries.

If you’re thinking of repatriating your salary, buying or selling your overseas property, making an investment, or transferring funds from or to a foreign bank account, our dedicated customer support team or your personal account manager will explain everything you need to know about making a transfer effectively. You can also use our simple and user-friendly online platform to transfer your funds in a fast, secure and affordable way. Get in touch now with Universal Partners FX and find out how you can make the most of your hard-earned money.

If you are a business that needs to pay your employees and suppliers abroad or convert income from overseas, you must have used the services of a bank or a currency specialist to do so. Using a currency specialist such as Universal Partners FX comes with certain benefits that your everyday banking institution cannot possibly deliver. From saving you money in unnecessary fees as well as securing a competitive exchange rate, UPFX’s dedicated team can relieve you of the burden of worrying about the exchange rate eating into your finances. A currency specialist will always provide a more thorough service than any bank can, and the overall winner is the client - getting better rates and more in depth insights.

If you want to make the right decisions and get the very best value when operating in the currency market, here are a few tips to consider.

Plan Ahead

Many businesses make the mistake of dealing with their foreign payments on a day-by-day basis. This opens you up to a huge amount of currency risk as the rate can fluctuate wildly from one to day to the next. At Universal Partners FX, we always help clients plan ahead by assessing their currency risk for the next 12 or even 24 months against the current rates. A strategy like this devised by an expert who will monitor the market can start saving thousands after just a few months.

Ignore Rates (at least initially)

This might sound illogical, but rates are not the most important thing when devising a strategy for your business to get the best value on foreign exchange. Choosing a provider based on their lower rates may yield dividends initially, but what happens when rates move? Like anything, price doesn't tell the whole story. Look out for the array of services that enable you to be flexible when the inevitable movements occur in the market. A spot contract can help you secure an excellent exchange rate at the moment you want to make an instant transfer, but you can budget effectively and protect your business from unexpected market volatility by fixing an exchange rate in advance with a forward contract. UPFX also offers stop loss and limit orders when you want to target a specific exchange rate. A limit order enables you to make a transfer at your desired and predetermined rate when the market reaches that level. A stop loss order is also perfect when you want to protect your funds against an unexpected currency drop by setting a predetermined worst-case rate. These are off-the-shelf products, but every business is different so we always tailor our strategies to suit the needs of each client individually.

Define Your Risk Appetite

As well as limiting risk, our services can also do much more than that. For businesses that have a higher risk appetite, our currency hedging solutions can enable businesses to profit from positive market fluctuations. Of course, this comes at a risk - but if you are in a saturated market where competitive advantage is everything, these strategies can not only protect your business, but also provide extra value that you can pass on to your customers. So before you embark on any strategy, it is important for you or your foreign payment provider to consider what risk level is appropriate for your business to cope with. 

 

If your business requires currency services to boost your bottom-line profits, UPFX’s dedicated customer support team or your personal account manager will explain everything you need to know about making foreign transfers effectively. You can also use our simple and user-friendly online platform to transfer your funds in a fast, secure and affordable way. Get in touch now with Universal Partners FX and find out how you can get the best possible value from the currency market.