UK Government Pressures Weigh on the Pound

By Luke Dyson

As we enter July we have seen Sterling take quite a tumble against the Euro, with the market still trending down from the last week of June.

There are a few factors as to why this has happened – the ongoing tensions in the Middle East and poor UK growth (GDP) data, but more recently the fact the Prime Minister is in the midst of a major rebellion amongst his Labour MPs.

The GDP data we saw last week come back at 1.3% , which is relatively weak compared to where the UK needs to be, but also shows no progression from the previous data release showing 1.3% as well. This is obviously concerning for the UK’s economy, with the fact it is not growing at the pace the government is hoping for, a major concern. As a result we are seeing this displayed in the strength of the Pound.

But this could be a small bump in the road compared to the situation Prime Minister Keir Starmer has developed. As it is claimed he does not have the mandate to get UK spending under control. This is due to the fact a large portion of Labour MP’s are unhappy with Starmer’s plans to reform the welfare system. Some last minute negotiations between the rebels and the government, together with a very significant change to the proposed bill, meant it narrowly passed in the Commons yesterday, but whether this will be enough to see a period of stability for the government is hard to say.

Uncertainty is the biggest threat to a currency’s strength and as a result we have seen some serious blows to Sterling’s strength on top of the data driven trend.

Give what’s going on at present, if you have an upcoming currency requirement it could be worth speaking to your currency consultant to discuss this further to see what we can do to limit your risk moving forward if Sterling was to tumble further.

We have multiple different contracts available such as forward contracts and limit orders, which can help to mange your risk.

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