The pound rose against the US dollar following strong UK labour-market numbers. British employers added a record 241,000 staff in August, pushing the total number of employees on company payrolls above pre-pandemic levels, official data showed on Tuesday.

The latest unemployment report by the Office for National Statistics shows job vacancies rose above one million for the first time since records began as the UK economy continues to recover from the Covid-19 pandemic, while payrolls rose by more than expected. The strong data will possibly help persuade Bank of England policymakers that perhaps UK monetary policy could be tightened sooner than expected.

Jobs data

The latest unemployment report showed the number of vacancies in the three months to August to have reached above one million, as firms struggled to fill positions mainly in the hospitality, transport and storage sectors. It also showed a lower unemployment rate and a monthly increase in August payrolls.

The ONS stated: “The fastest rate of growth was seen in other service activities, which grew by 93.3% (12,500), followed by transport and storage at 76.3% (20,300) and accommodation and food service activities at 75.4% (57,600). In the latter two categories labour demand has increased rapidly while staff availability fell because of a mix of employees leaving these sectors to find employment elsewhere and a reluctance of workers to return to their previous roles.”

Minister for Employment Mims Davies MP has welcomed the rise in payrolls and said: “As we continue to push ahead with our recovery, it’s great to see another significant fall in unemployment and the number of people on payrolls rising by 241,000 in August – the biggest monthly increase on record – showing our Plan for Jobs is working. We’re helping employers recruit for the record number of vacancies out there, particularly in growing sectors, and supporting people of all ages and backgrounds to overcome barriers, land their next role, and progress in work.”

While payroll employment is back at pre-pandemic levels, there are still many years ahead of recovery, with employment more than 700,000 down and long-term unemployment up 45%. There are still more than a million people furloughed and with the scheme ending this month, more people will be looking to find employment.  

Furlough scheme concerns

Economists and politicians are worried that with the furlough scheme ending this month, jobs recovery will be hurt, after the rise in payrolls and vacancies. A lot of furloughed staff might not even return to their jobs as a lot have had their wages subsidised and might not be kept into full-time employment.

There is also a skill shortage as many industries have reported a lack of available labour and hiring difficulties. With Covid adding more uncertainty after Brexit and the new national insurance tax adding more costs to employers, it is unclear how businesses will respond to future hiring needs.

While the data is positive for the pound, investors remain cautious ahead of Wednesday’s UK inflation data, which could show an increase in the core rate in August to 2.9% year/year from July’s 1.8%.

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 the latest market movements ahead of your currency exchange. If you are transferring funds to pay 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.

Sterling fell on Tuesday against a stronger dollar, following a drop at the start of the week due to the UK’s economic slowdown.

Weak surveys push pound lower

While earlier this year, markets were upbeat about the UK’s economic prospects as the fast pace of the Covid-19 vaccinations injected confidence about reopening the economy and a quick economic rebound, more recently indications of a slowdown have pushed the pound lower. Additionally, the combination of factors such as Covid-19 that forced lots of employees to stay at home and hurt businesses, as well as global supply issues due to Brexit, have also drove the British currency lower.

On Monday, it fell after a survey of purchasing managers showed that the UK construction industry was hurt by a shortage of building supplies which weakened its growth last month. Friday’s PMI data also showed that growth in the services sector slowed down in August compared with July.

Bank of England’s Michael Saunders

The positive comments by Bank of England’s policymaker Michael Saunders did not have a significant effect on the pound. Saunders said the central bank may need to raise interest rates next year if both growth and inflation continue to rise. His comments did not surprise markets as investors possibly do not consider him as an influential voice of the MPC (Monetary Policy Committee).

Saunders believes that the Bank could stop its stimulus programme and that the continued purchases could put inflation expectations at risk. In an online event hosted by Intuit, Saunders explained why he voted to reduce the Bank’s QE bond-buying stimulus programme at last month’s MPC meeting: “My own view at the August meeting was that with the recovery in the economy, and inflation back to target, we no longer need as much monetary stimulus as previously.”

He also noted that interest rates could rise when the health of the economy is undeniably strong: “As to when I think interest rates might rise, that would depend on the economic outlook.” He added: “If the economy continues to recover, and inflation shows signs of being more persistent, then it might be right to think of interest rates going up in the next year or so. But that is not a promise and depends on economic conditions.” In relation to inflation, Saunders said that he was worried “that continuing with asset purchases, when CPI inflation is 4% and the output gap is closed - that is the likely situation later this year - might well cause medium-term inflation expectations to drift higher. Such an outcome could well require a more substantial tightening of monetary policy later, and might limit the committee’s scope to respond promptly the next time the economy needs more stimulus.”

Saunders argued that the UK economy has recovered and that the pandemic’s effects will prove to be minimal in the log run. Brexit, on the other hand, will have long term repercussions. For him, ending the current asset purchase programme would not hurt economic recovery as it would still  leave a “very supportive monetary stance in place.”

Last month the BoE said that it could start reducing its financial support which was so necessary during the Covid-19 pandemic and lockdowns, and it has explained how it will do so after it has raised interest rates.  

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 the latest market movements ahead of your currency exchange. If you are transferring funds to pay 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.

The British currency rose against the US dollar and the euro, after the return of investor confidence.  With the recovery of major stock markets, investor risk appetite returned helping boost currencies such as the pound which are closely influenced by global market sentiment. The pound is considered a risk currency and is vulnerable to risk-off sentiment at times of risk-on.

Major concerns such as the Delta variant and the Fed’s removal of its stimulus programme will be the main drivers for global currencies such as Sterling. While there is still significant uncertainty about how the delta variant will affect markets, most developed economies are expected to grow steadily. Nonetheless, Sterling will remain sensitive to global developments than domestic economic data, as the economic calendar is thin with releases of little impact.

Risk on and Risk off sentiment

The widespread risk on and risk off sentiment, also known as RORO is the major driver of currencies in the market at the moment. Two of the key concerns of global investors are the withdrawal of the Federal Reserve’s stimulus and the rapid spread of the Delta variant in Asia.

But what is exactly risk sentiment? Simply, risk-on risk-off refers to shifts in investment activity as a result of global economic events. The foreign exchange market is basically affected by changes in the ways investors behave and where they choose to invest. The theory states that investors engage in higher risk trades when the risk is considered low and avoid high-risk investments when the risk is perceived to be high. So, investor appetite changes depending on global sentiment and whether risk is high or low. For example, the 2008 financial crisis was considered a risk-off year, as investors avoided risk by selling their risky assets and turning towards low or no risk positions such as U.S. Treasury bonds.

The risk-on risk-off sentiment is also affected by different asset classes, as some carry higher risks. Stocks are riskier than bonds and so when stocks are preferred more than bonds then the market is considered a risk-on environment. A risk-on environment is one where investors invest into riskier assets.

A risk-on environment is usually one where a combination of positive economic factors, data and events co-exists, showing that the market is healthy and strong, and risk is limited. Strong economic data such as corporate earnings, an optimistic outlook, and supportive central bank policies reflect a market where investors have more room to take on more risk.

Federal Reserve and monetary stimulus

In the coming week, the fundamental concern for markets will be the Federal Reserve's decision to withdraw monetary stimulus. On Thursday, Federal Reserve Chair Jerome Powell will give a speech at the Jackson Hole central banking symposium and investors expect him to announce the Fed is ready to start reducing stimulus, possibly as soon as this September. While this is good news for the  US dollar, stock markets which have been supported by the Fed’s funding will find the news disappointing. This will also affect the British pound which could fall following such an announcement. For some analysts, Powell might avoid bringing up monetary policy at the symposium, but others believe that the dollar will weaken if the Fed postpones the planned withdrawal of its funding.

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 the latest market movements ahead of your currency exchange. If you are transferring funds to pay 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.

Sterling experienced some volatility after reaching a fresh three-year high against the US dollar due to expectations for an economic recovery and positive house price data. Some analysts have attributed the surge in the pound to positive global investor sentiment about the UK economic recovery, while others pinned the pound’s gains on a retreat in the US dollar.

US dollar weakness & BoE interest rates

According to strategists at Toronto-Dominion Bank, “The whole ‘U.K. vaccine’ story is a little tired.” It’s probably less about the U.K. and more about the USD, which has been drifting lower overall.”

Beyond the prospect of unlocking the economy, the pound found support from expectations that the Bank of England will soon signal that it may start to raise interest rates next year. The UK’s economic recovery and the potential of the Bank of England ending asset purchases and hiking are encouraging traders to buy the pound.

Concerns about the new variant

However, Sterling has also been influenced by concerns over a new coronavirus strain which pushed the currency lower. The new Indian variant along with concerns about reopening the economy on 21st of June have dented some of the pound’s recent gains. The new strain appears to be more transmissible than previous ones. While the variant did not appear initially to pose a big threat, growing concerns from the government as to whether the UK will fully reopen the economy or there will be delays, have hurt the pound.

The Indian variant is spreading across the UK and the latest statistics suggest Covid-19 cases are starting to rise sharply. The strain is mostly found in England. The government is waiting for more data before it decides to relax restrictions. Politics will also play a role, especially after the criticism the government has faced regarding its handling of the pandemic. Boris Johnson’s government is under political pressure following testimony to MPs by Prime Minister Boris Johnson's former senior adviser Dominic Cummings. This might drive the government to adopt a more cautious approach to June 21.

Any delay will be seen by traders and markets as negative for the pound in the short-term as it could hurt business and consumer confidence while postponing the ability of the economy to recover fully. The fact that such concerns about the economy have also coincided with increasing public scrutiny of the government’s response to the Covid-19 pandemic, they could potentially drive the pound lower against both the US dollar and the euro.  

For this week then, the main drivers for the pound will be any signs showing that the government intends to fully lift Covid-19 restrictions on 21 June and any data regarding the impact of the Covid-19 “Indian variant”.

 

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 the latest market movements ahead of your currency exchange. If you are transferring funds to pay 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.

The pound has potential to rise further as more positive news is expected, while some risks remain relating to concerns about the pandemic and a rising euro. The latest Lloyds business barometer for the month of May rose to a three-year high, while Gertjan Vlieghe, an outgoing Monetary Policy Committee member at the Bank of England (BoE), said on Thursday that interest rates could rise by the middle of next year. At the same time, with a thin economic calendar the pound could fluctuate unpredictably in what is expected to be a volatile week ahead. also mean that the pound

Rising Renmbibi exchange rates

The Pound-to-Euro exchange rate could be volatile with the potential to rise higher if the recent boost in Renminbi exchange rates leads the Peoples’ Bank of China (PBoC) to buy non-Dollar currencies in a bid to ward off dollar appreciation pressures. China’s exchange rates rose after a decision to allow USD/CNH to fall. The move was the result of concerns regarding rising Dollar-denominated commodity prices and was driven by an attempt to offset the increase through a stronger exchange rate. This eventually resulted in the rise of other Chinese exchange rates that are a macroeconomic hazard for the PBoC, as research analysts have noted. The fall of the USD/CNH supported the Renminbi against all China Foreign Exchange Trade System (CFETS) currencies.

The rise of Renminbi is problematic for the PBoC because it results in cheaper imported goods and could drive the bank to buy other currencies in an attempt to reduce its other exchange rates. In general, a prolonged period of RMB appreciation and USD weakness could become an issue for policymakers and the PBoC could use further administrative tools to control this.

The currency pair could also be further affected by the BoE Governor Andrew Bailey’s speech on Tuesday on the subject of "Building a Finance System Fit for a Clean, Resilient and Just Future."

Euro appreciation could drive pound lower

Analysts have explained that the euro could be the main currency in Europe to benefit from the PBoC’s potential attempt to manage extreme currency appreciation. The pound-to-euro exchange rate has performed well, However, if the euro rises, this will potentially push the pound to euro rate lower. On Wednesday, when the ECB releases a report on the international role of the euro, the common currency could rise, and this could possibly push the pound lower.

Covid-19

At the moment, the markets might be relatively calm in both the US and the UK, and after Friday's volatile trading, but fears of Covid-19 variants may send sterling down, some analysts are saying. FXStreet’s analyst Yohay Elam stated that “People residing in the UK may enjoy the long weekend at home and in several European countries – but not in France nor Germany, where they are required to quarantine. These restrictions serve as a reminder of the B.1.167.2 variant. Sterling is on the back foot due to these fears.”

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 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 has fallen against the euro and the US dollar, despite the lack of any clear data that could be responsible for the declines. This is also what makes it difficult to pinpoint what news or events could potentially affect the pound’s performance.  

Analysts have argued that since the UK is no longer at the centre of financial news and data, and as interest has shifted to other currencies such as the euro, the British currency has lost momentum. It has also been noted that markets have priced in all the good news for the pound, so no bigger rises are expected at the moment. The successful vaccination programme and the reopening of the economy has provided support to the pound and the market Many analysts have also said that the weakness in the US dollar has also been partly responsible for some of the recent gains, which also highlights the fact that they are not any clear drivers that will push the pound higher. UK economic data has generally surpassed expectations, but this has not necessarily translated to any obvious additional upward pressure.

Higher Interest rates and Pound

Market expectations for higher interest rates, could also provide support to the pound. But for the market to become confident and positive, the Bank of England will need to show signs that is committed to raising interest rates. However, policymakers have not shown any firm conviction of raising interest rates any time soon. While inflation might be rising, BoE Governor Andrew Bailey believes that inflationary pressures are only temporary. But unless the Bank’s Monetary Policy Committee agrees in its majority that it’s time to raise interest rates, the pound is unlikely to rise unexpectedly. At the moment, the pound will be influenced by global market movements.

Cummings’ Testimony, the Pandemic and Indian variant

Sterling has been the second best performing G10 currency against the US dollar this year, because of investors being positive about the UK economy reopening, following its successful vaccination program. Britain started the third phase of reopening the economy last week, allowing indoor dining in pubs and restaurants. Retail sales data were upbeat as well as surveys of purchasing managers across different industries.

This week’s pound weakness has been partly explained by the lack of data, but also by pandemic concerns and Dominic Cummings’ testimony. Cummings’ testimony on Wednesday has been described as the “Sword of Damocles" and his explosive statements have undermined the government and could potentially keep the pound lower. He has likened the management of government officials during the crisis to "lions" being "led by donkeys". The pound may also be subject to news about the pandemic and the worrying rise of cases. The spread of the Indian variant has also added to pound pressure and these factors have partly kept the pound low, despite dollar weakness.

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 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 pound has risen to its highest level against the US dollar in almost three months. With the dollar weakening, Sterling rose to its highest level since 24th February, supported by jobs data that showed a drop in the UK unemployment rate, to 4.8%, and increase in employment. The stronger than expected jobs report and the weaker dollar help boost the pound.

UK Employment Rises

Employment data from the UK showed a rise in employment with 84,000 gaining jobs in April following the reopening of the economy and the loosening of lockdown measures. The labour market is characterised by high-skilled workers furloughed or made redundant pandemic or low-skilled workers unable to gain new employment. Employers began hiring again in March, which helped to reduce unemployment for a third consecutive month. The number of workers seeking employment fell to 1.6 million in the three months to March, compared with 1.7 million in the three months to February, the Office for National Statistics said. The quarterly rate was down to 4.8% from 4.9% in February.

The number of employees on company payrolls continued to rise but remained 772,000 below pre-pandemic levels. The number of job vacancies also continued to rise into April, with most industries showing signs of growth.

Jobless rate to Rise in Autumn

However, ING expect the jobless rate to rise at around 6% in the autumn, as the furlough scheme comes to an end September. James Smith from ING stated: “We can already see signs of a rapid turnaround in the hospitality sector over recent weeks, where online job adverts have returned quickly to pre-virus levels since the reopening road-map was announced.

While this is a ‘flow’ measure and clearly isn’t the same as saying employment has returned to where it was before the pandemic, it does suggest some of the past employment losses we’ve seen over recent months could be quickly reversed over coming months.”

Thomas Pugh of Capital Economics also said that the unemployment rate may rise to around 6.0% by the start of 2022 but should fall eventually: “The unemployment rate may still rise over the rest of this year. But this will probably be due to people re-joining the labour market rather than more people losing their jobs. Of course, this is all dependent on the path of the pandemic, and whether the UK is able to exit the crisis - or if new variants force new restrictions to be imposed.”

Employment Data is welcome news

The jobs data was welcomed by the Minister for Employment Mims Davies MP who said that the report shows how resilient the jobs market has been. He said: “A continued fall in unemployment, a further rise in vacancies, and growth in the employment rate is welcome news as we continue on our roadmap to recovery. While there is more to do to make sure we support jobseekers over the coming months, these figures highlight the resilience of our jobs market and ability for employers to adapt – and through our Plan for Jobs we’re continuing to create new opportunities for people right across the country.”

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 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.

 

A weak US dollar and rising hopes for a trade deal between the European Union and Britain helped Sterling rise on Tuesday afternoon.

Analysts are now saying that the pound could rise further in the event of a post-Brexit trade deal. This, of course, is something we have seen every time that there was any positive news pointing to a breakthrough to the negotiations. Sterling fell immediately after the UK referendum vote to leave the EU in June 2016, as political uncertainty hurt the pound. Since then, Sterling has been volatile every time news was released regarding Brexit and has fallen on news of a stalemate in the negotiations or disappointing updates from both sides. As we are nearing the end of the Brexit transition period, and the possibility of an agreement appears more certain, the pound will most possibly react positively and rise.

A possible agreement by mid-November will support the pound

Optimism regarding the trade talks has risen recently after the EU’s negotiating team and Michel Barnier the EU’s chief Brexit negotiator said that they will resume talks in London until Wednesday 28 October and many reports have noted that an agreement could be reached by Saturday, 31st October 31.

Any time from now until the middle of November, when a possible deal might be reached, Sterling could strengthen as long as the two sides ensure that a no deal scenario is not in the cards.

By reaching an agreement, both sides will provide certainty to businesses and investors, eliminating uncertainty, restoring sentiment and offering relief to the pound.

USD weakness to support the pound

For many analysts, the pound might rise, but this might not be a sharp rise and it will only be the result of a depreciation of the USD. At the same time, they predict that a strategic buying of Sterling in anticipation of a deal being reached might be possible, but this will be short-term.

According to Pound Sterling Live, Rabobank see potential for the GBP/EUR exchange rate to rise if a Brexit deal is announced, but such a rise will be limited.  Jane Foley, Senior FX Strategist at Rabobank said: "We don’t expect that relief at the end of the Brexit process will be sufficient to divert attention away from a poor set of UK fundamentals," she adds.

"If we are wrong on the market’s assigned relative probabilities, then Sterling will move more or less than we expect. Given the better mood music of recent weeks, risks appear skewed in favour of a smaller move,” Paul Robson, Head of G10 FX Strategy EMEA at Natwest Markets said. But they also highlighted the issues lying ahead, including that of companies having to adjust to the new realities after Brexit and the potential disruptions in various sectors, including the auto industry that were recently highlighted by the automobile sector.

Potential threats ahead

Economists are emphasising the fact that Brexit will not only disrupt various industries and create uncertainty about the future of businesses, but it will add to the UK’s existing problems. The economy is currently hit by Covid-19, government finances are deteriorating, and lockdown restrictions are hurting the economy further. With a weak economy and limited investment flows, the pound might have a rocky road ahead, with or without a Brexit trade deal.

Are you Transferring funds abroad?

With the British currency remaining sensitive to Brexit uncertainty, you should get professional assistance when transferring funds abroad. Whether you are importing or exporting goods, paying employees overseas, or managing regular payments abroad, you need to be prepared and protect your business or your family finances from market volatility. Get in touch with Universal Partners FX to find out about efficient risk management and tailored solutions to your business’ transfer needs.

The uncertainty caused by the coronavirus pandemic has certainly affected exchange rates and increased currency volatility. However, the US Dollar is a safe-haven currency, like CHF and JPY, which means traders have turned towards the USD during the crisis, causing it to move higher. In the short term the outlook for the USD appears to be positive. In the long term, though, the currency is seen as dropping, according to recent analyses. But let’s see more closely what is happening to the USD.

Short-term outlook

For many economists, the buying of safe-haven currencies due to the coronavirus will continue in the coming weeks and will strengthen the dollar. Already, the greenback has been steadily rising through 2020, but rose even higher, outperforming its major peers as global governments struggled to contain the virus, enforcing strict lockdown measures that have unavoidably hurt their economies.

Eventually though, in the longer term, the dollar will decline, according to Georgette Boele, senior FX strategist at Dutch investment bank ABN AMRO. Referring to the dollar’s outperformance, Boele said: "Do we expect this trend to continue? In the near-term (up to 3 months) yes, on the longer-term no.” The dollar will possibly rise higher, the Dutch bank predicts, because traders are overoptimistic about how quickly global economies will recover. Once it is realised how badly global markets have been hit, another wave of selling riskier assets and buying “safer” ones such as the USD will be triggered. As Boele explains: "There is an enormous gap between the economic reality and what analysts forecast, on the one hand, and the optimism among investors for the second half of this year, on the other. This should support the U.S. Dollar as most liquid safe haven currency.”

For Boele, the Dollar will find support in the short term if there is a second wave of coronavirus cases, as investors turn again to safe havens.

Additionally, in terms of Sino-American tensions, any increase of anxiety regarding geopolitics will favour the USD.

While the dollar will not be falling any time soon, it is possible that with the easing of the lockdown measures and the risk of a global recession being averted, the greenback might experience downside pressure. 

Long-term outlook

This is why, as Boele asserts: "After macro and earnings disappointments in the next few months, later this year investors could start to look forward to a strong and durable recovery in 2021. Therefore, over the medium term, investors will shy away from safe haven currencies such as the US dollar and Japanese yen and be open for alternatives.”

As economic conditions improve, the dollar could possibly lose momentum. The US Federal Reserve’s QE programme which has increased dollar supply to respond to the coronavirus pandemic will also add to the dollar’s potential woes. Boele said: "Because of the unlimited QE by the Fed, there is already some more confidence in financial markets. As soon as safe haven demand fades, the Dollar will decline. The QE is simply too large for the Dollar to ignore.”

How UPFX can help

If you are selling or buying dollars and are concerned with transferring your hard-earned money, then you can reach out to Universal Partners FX. Their dedicated foreign exchange currency specialists can offer valuable insights into the markets and tailor their services to your specific needs, protecting your funds from unpredictable currency movements. If you want to discuss your FX needs or make a transfer, please get in touch with Universal Partners FX.

Sterling has hit an 18-month high against the US dollar and a three-year high against the euro after the Conservative party won the general election with a majority. Investors have welcomed the results as the Prime Minister’s majority means clarity and certainty on Brexit. The pound’s surge vs the US dollar is one of the biggest gains in a decade and economists are now predicting that sterling could strengthen even further.

Since the release of Thursday night’s exit poll clearly showing Boris Johnson was expected to win the election, the pound has gained strength, both against the US dollar and the euro. Now investors are hopeful that Brexit will be delivered on time by the end of January 2020 with Johnson’s Brexit deal.

Conservative triumph: Best outcome for the markets

According to financial analyst at MUFG, Lee Hardman, the election is “the best outcome for financial markets in the near-term. It brings a clear end to the Brexit deadlock in parliament, which will be welcomed and help to ease some of the ongoing uncertainty. The risk of a ‘No Deal’ Brexit will pushed out until the end to next year, and the new government will not be as reliant on securing support from hard Brexiteers during future negotiations. The pound is well placed to extend its advance even after recent strong gains.”

However, other economists are warning that the possibility of a no-deal Brexit in 2020 will put more pressure on the economy. Paul Dales of Capital Economics said that “The majority confirmed in Parliament will allow Johnson to pass his Brexit deal, which would mean the UK leaves the EU on 31st January and enters a status quo transition period until 31st December 2020. A fiscal stimulus of £20bn per year (1% of GDP) may then follow in a Budget in February. But this probably won’t unleash a tidal wave of business investment that leads to much faster GDP growth, much higher interest rates and a much bigger rise in pound than the gain … already seen. That’s because businesses will fear that the UK could end up trading with the EU on WTO terms after 31st December 2020, the immediate effects of which would be similar to those of a ‘no deal.’”

While many investors and analysts have highlighted the uncertainty regarding the next phase of Brexit and the future relationship the UK will negotiate with the EU, nonetheless, the Conservative’s victory is the ideal result for businesses as a clear majority eliminates the risk of a hung parliament and Corbyn’s radical politics, and eases anxiety about Brexit.

Getting Brexit done

This is why, the next step would be for the Prime Minister to secure the right deal with the EU so that businesses can thrive. The Institute of Directors, for example, is asking Johnson to give time to businesses to adjust and secure the right deal with the EU rather than just any deal. Jonathan Geldart, director general of the Institute of Directors, said:

“Business leaders’ thoughts will immediately be turning to Brexit. For directors, ‘Get Brexit Done’ will only have meaning once the details of our long-term future relationship with the EU are clear, they need a framework to plan for the future from. The Prime Minister must resist the urge for arbitrary negotiating deadlines, and should commit to a proper adjustment period that starts when businesses know the full detail of what changes they may be facing. Our members have made clear that the content and shape of any new deal are much more important than simply the speed in getting there.”

Not only the markets, but also the US president welcomed the results. Donald Trump tweeted: “Congratulations to Boris Johnson on his great WIN! Britain and the United States will now be free to strike a massive new Trade Deal after BREXIT. This deal has the potential to be far bigger and more lucrative than any deal that could be made with the E.U. Celebrate Boris!”

Indeed, with the election results, the UK has demonstrated its preference for Johnson’s clear-cut logic for getting Brexit done and its distaste for Corbyn’s left-wing policies. At the same time, analysts are cautious about the dampening effect Brexit has had on growth and the uncertainty it will continue to exert on the economy as the UK strives to secure a trade deal.

Transferring money overseas?

If you are transferring money overseas and want to protect your funds from currency fluctuations, then getting in touch with currency exchange specialists Universal Partners FX, will provide you with the certainty and security you need. UPFX monitors the markets and offers strategies to manage market volatility so you always know your money is delivered fast and securely. For more information, visit their website or give them a call.