Inflation data weakens the £ as Article 50 looms.
This morning saw the release of a few UK data sets including the Retail Price Index and Consumer Price index. These both came in lower than expected and are currently responsible for the half cent dip against the Euro we are seeing since this morning.
Both these readings are seen as key measures of inflation that give an accurate reflection of the cost of living. Given these low readings it is likely we are beginning to see the effects of the UK’s imminent departure from the European Union.
With the House of Commons giving their approval to Prime Minister May to trigger Article 50 before the end of March and the House of Lords looking likely to agree in the next few days. May’s deadline looks likely to be achieved and the 2 year negotiations to begin on time.
When these negotiations begin it is highly likely that we will see a great deal of volatility surrounding the Pound, some analysts have suggested rates could shift by as much as 9 percent. In my opinion it is likely to weaken in the short to mid-term with the uncertainty of our position concerning the EU and indeed the rest of the world this will create.
However there will be some countering factors to keep an eye on in the Eurozone through this period of instability. France’s upcoming election is beginning to look less likely as an easy win for Republican Francois Fillon after controversy surrounding his wife and a large payment for work that doesn’t seem to have been done. This has made way for far right staunch EU critic Marine Le Pen to become a front row contender in the election. Marine Le Pen wants France to hold its own referendum and exit the EU. This will be worrying for Europe as a whole as other countries including Italy may follow France’s lead.
Across the pond President Trump continues to be controversial in his first 100 days in office.
Today Michael Flynn appointed National Security Advisor by President Trump has resigned over reports that he had discussed US sanctions with Russia before Mr Trump took over. It is illegal for private citizens to discuss US Diplomatic Policy. Such controversy is just the tip of the iceberg lately and further developments are likely to cause ripples on the currency markets.
Even with all these factors I believe the current buying rates for Euros are favourable and if you’re planning to travel before or just after March I would be seriously considering hedging your bets now rather than later.
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For anything discussed in this blog or any advice on your future currency needs please feel free to contact us at firstname.lastname@example.org
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