Sterling exchange rates were relatively stable last week- with Pound to Euro rates closing at the 1.11 area on Friday and Pound to Dollar exchange rates closing at 1.21- of course, these rates are a lot lower than what we had a couple of weeks ago, but through the last week we haven’t seen much movement at all.
Many analysts are calling for Pound to Euro rates to fall to 1.10, some are saying 1.05, and some are calling for rates as low as 1.02- of course, these are just forecasts- but the reasons why are more important than the numbers they are stating.
The reasons being- The Bank of England will be adding more QE into the mix from June, this is a guarantee- but talks of negative interest rates are growing and it seems that this may be a route that the BoE goes down- this will push Sterling lower if it happens. We then, of course, have the Brexit deadline, an extension would be avoiding a no-deal scenario, but we will have to see if we extend or not, and how the market reacts, but right now this is adding a weakness to the Pound. The last reason is the UK “Lockdown”- with most countries now coming out of theirs, eyes are on the UK to see how we emerge from our lockdown and how our economy reacts- we expect to hear news from the Government over the next week about moving to the next stage, which I imagine will happen quicker following the news around Dominic Cummings, the Government will be looking for a distraction and this would be the perfect type.
Over the next few months, as the UK emerges from its lockdown, all eyes will be on our unemployment rate- with the furlough scheme changing at the end of June, and employers now having to contribute to salaries, I imagine redundancies will begin, and this will get worse up until furlough finishes in October- this is when the UK economy will really start to take a hit.