UK Trade Deal Announcements Create Confidence

Over the weekend several nations have declared interests in setting up free trade deals with the UK. Australia’s Prime Minister Malcolm Turnbull has made it clear that as soon as the UK is free from the EU, there is a full agreement in place. The UK is unable to sign anything currently as its still part of the EU, but all the planning work can take place.

Sterling has gained nearly a cent this morning in the first few hours of trading, this in my opinion will continue to improve as the UK invokes more confidence. If major trading nations such as China and India can organise agreements with the UK then investors will have to believe Sterling is in a better position than the Euro, essentially causing the rate to jump.

The main fear for Sterling is in August if the Bank of England cut the interest rate level, currently low inflation is being improved due to a weak currency. However Governor Mark Carney needs to decide if the economy will need more cash injection. Lowering interest rates makes it cheaper to borrow money and if there is further quantitative easing that will increase the amount of cash available to banks. The Brexit vote has essentially damaged business confidence in the UK and companies will be wary of massive investments during times of uncertainty.

This morning Japanese company Softbank announced their intention to purchase ARM holdings for £24bn. ARM build the micro chips that are used in Apple’s Iphone and Samsung’s mobiles. The company expect to double their current 3000 workforce in the UK in the next 5 years. Acquisitions into the UK during this volatile time could really help markets to settle.

As a trader in a currency brokerage I am able to help you achieve the best rates possible, whilst also assisting with the timing of a transaction to make sure you get the most for your money. If you do have a currency requirements please feel free to send me Ben Fletcher an email at brf@currencies.co.uk.