The pound continues to remain under pressure and has begun the month of July close to the lowest levels to buy Euros in almost 3 months, with the Interbank level hitting 1.128 on 2ndJuly. The EU Summit which took place at the end of last week caused the Euro to strengthen against the Pound and US Dollar, amongst a host of other major currencies. This Euro strength was put down to many EU members edging much closer to agreeing on how best to deal with the current migrant crisis.
UK economic data has been relatively poor of late, with GDP (Gross Domestic Product, a key barometer of economic Growth) figures being released at just 0.2% last month. To put this into context, the Growth rate in the US is currently at 2.2%.
There was, however, some respite for the Pound in June when one more member of the Monetary Policy Committee than at the previous meeting voted in favour of a hike in Interest Rates. The currency markets reacted positively to this news, as although rates were left unchanged at 0.5%, this sparked further speculation that a rate hike could be seen in the near future - potentially at the Bank of England’s next meeting in August.
However the main topic keeping Sterling’s value pinned down is Brexit. Discussions haven’t really made any progress for some time, when it had been hoped that this would be a priority discussion point at the EU Summit. Teresa May is expected to release a White Paper during a cabinet meeting on Friday 6thJuly at Chequers, which could be make or break for both Brexit and also her leadership. Mrs May has had a constant struggle recently in trying to get her party to agree to key issues, and a divide has been growing for some time between those who want a hard Brexit, and those who are pushing for a soft Brexit. If Friday’s discussions don’t go to plan, a vote of no confidence could potentially put her leadership in jeopardy, and would almost certainly be Sterling negative if this were to happen.