UK Unlocking: How Does This Impact Your Business?

At the time I started writing this article, the UK was set to be fully ‘unlocked’ over the next few weeks. With recent developments, this goal is looking less secure and, as a result, the ideas in this piece are only made more poignant. Business owners, economists and remote workers are waiting with bated breath, as we return to normal. What does this mean for foreign exchange and, more importantly, how does this affect your business? The Bank of England’s (BOE) target inflation rate plunged from 2% to 0.7% in the past year. It makes sense, then, that the two years of little to no economic growth is forced to recoup. The lower the interest rate, the less motivation there is to keep money in the bank, so you know what 0.1% means: time to go shopping! Quantitative easing - another tool to adjust inflation - is also being kept at a stable level by the BoE. The bank reported that the ‘amount of quantitative easing [will be kept] at £895 billion.’ Further push for growth has finally shown physical results. It has been widely argued that the UK's ability to strike its own trade deals is one of the big benefits of Brexit. If you want more spending, giving the public access to cheaper food and the opportunity for wider Asia Pacific trade is certainly a start. I am, of course, referring to the proposed Anglo-Australian trade deal, in the pipeline. The BoE predict that inflation will return

2021-06-11T13:43:37+00:00June 11th, 2021|

Will the Scottish Election Cause Sterling Volatility?

The short answer is potentially. Background In recent years we have seen politics have a significant influence on FX markets, in large part due to the overarching and slightly controversial nature of the subject matter; Brexit, President Trump and other leadership challenges to name but a few. In recent days, we have seen further controversies surrounding Prime Minster Johnson which are being looked at independently. Also, it has not been short of controversy with Scottish National Party (SNP) leader Nicola Sturgeon weathering the storm and remaining in power. May 6th will see the Scottish parliamentary election with the SNP with a second independence referendum front and centre of its manifesto. The SNP currently hold 61 seats in a 129-seat parliament. If the SNP does not increase its overall majority, it will find it difficult to credibly continue its rallying call for a second independence referendum. If we see a larger majority than 65, it will be expected that further pressure will be put on the UK government to grant another independence referendum. Why Does This Matter? Sterling has been very sensitive to political uncertainty in recent years and despite the UK leaving the EU, Brexit concerns remain as ongoing discussions continue. In recent days, tension has peaked as French minister Clement Beaune warns 'retaliation measures' will be taken in sectors like financial services if fishing promises agreed between the UK and EU aren't met. Whilst we have seen Prime Minister Johnson continue to rule out a second independence referendum, his

2021-04-30T09:27:50+00:00April 30th, 2021|

Covid-19, Second Wave or Tidal Wave?

As we decided to include the possibility of this in our ‘Five Looming Dilemmas for 2020’ series, I hadn’t thought that by the time we came to produce the article we would be right in the middle of the event! Many of you will be under local lockdown, or back to working-from-home due on the latest government advice. One of my favourite authors, Adam Kay (best known for the book This is Going to Hurt), summarised it quite well in a recent tweet. Adam said, “I can’t believe the government’s plan of keeping cases down by telling us to go back to work and eat at restaurants as much as possible hasn’t worked.” I feel as though the UK response has appeared muddled at times. History and understanding For those who have been living in a cave, or recently arrived in 2020 via time machine, Covid-19 is a strain of Coronavirus that originated in China in 2019. Its highly contagious nature has resulted in a rapid spread throughout the globe and current statistics show it has infected over 38m people, with an excess of 1m deaths. The effect on consumers and world markets was initially one of panic, with toilet roll less prevalent than diamonds for the first time in recorded history, as supermarket shelves were stripped bare. Stock markets initially tumbled, with the FTSE100 dropping from around 7,400 in February to a low of around 5,000 in March, a near 39% drop. We currently sit around 5900, still 22.5%

2020-10-30T15:23:41+00:00October 30th, 2020|

Economic Outlook Q4 2020: Focus on FX Budgeting & Strategies for 2021

This quarter we should see the conclusion of various risk events that have been looming since the turn of the year; namely Brexit UK/EU trade talks and the US Presidential Elections. In a move away from our normal quarterly outlook (after all these are abnormal times), we will be focusing on some of the challenges that businesses are facing as we look towards 2021. We will cover ground on budgeting and deploying a currency strategy that is appropriate for the uncertain future. In this report, we will focus on the action central banks and governments have taken and the resulting effect on volatility. This year has been tough for many businesses, we are all hoping for an improvement in 2021, but in the words of James Cameron: "Hope is not a strategy. Luck is not a factor. Fear is not an option." However, you will also find our regular content where we will highlight some of the key factors that could drive GBP, EUR and USD exchange rates over the coming months as well as displaying institutional forecasts on GBPUSD, GBPEUR and EURUSD. Read the full report: Infinity_Economic Outlook_Q4 2020 Subscribe to receive our updates in your mailbox! This blog post is intended to provide you with information on the services Infinity International Limited (IIFX) offer and should not be interpreted as advice or as a solicitation to offer to buy or sell any currency or as a recommendation to trade. Foreign exchange rates

2020-10-23T15:14:40+00:00October 23rd, 2020|

Racing Towards The Final Furlough

I remember being glued to the daily briefings in mid-March after initially dismissing the early news with a ‘this will pass attitude’ – clearly Covid-19 was a different beast.  What I hadn’t expected was Chancellor Rishi Sunak’s announcement of the astonishing and unprecedented economic relief package for the UK. History and understanding This package announced on 20th March 2020 included grants to small businesses, access to alternative funding, deferred taxes, support for renters and additional financing for the welfare system.  Additionally, the Chancellor announced the scheme that most of us are now very familiar with and what this article will discuss; the Coronavirus Job Retention Scheme. Within this, the government agreed to pay for 80% of people’s wages so they can be furloughed rather than laid off to protect their jobs. This is one of the most important economic tools in recent history that has helped retain jobs in many of the business sectors that have been most affected by Covid-19. From 1st October, employers pay 20% towards furloughed staff’s wages and the government cover the remaining 60%. The furlough scheme now ends on 31st October 2020 and will be replaced by the Job Support Scheme and the extension of Self Employment Income Support Scheme.  The Job Support Scheme is designed to protect jobs in businesses who are facing lower demand over the winter months due to Covid-19, to help keep their employees attached to the workforce. The scheme will open on 1 November 2020 and run for 6

2020-10-19T09:57:42+00:00October 19th, 2020|

Do US Presidential Elections Affect the Dollar?

First, how do the US presidential elections work? Can we expect the US presidential elections to impact currency? Ever since President Trump shocked the world with his victory there has been speculation as to whether this polarising character could win a second term. COVID-19 and an uncertain economy have added new dimensions to what may have already been a landmark U.S. election cycle. We will soon find out which way things will go as Americans will head to the polls on November 3rd. We work with many UK businesses who have US dollar exposure, and the key question they will want to understand is what impact the election could have on currency rates moving into 2021 and beyond. To better answer this question, we're going to highlight the differences in approaches from Biden and Trump and ultimately how this might affect the performance of the US dollar. Interest rate policy is unlikely to change direction because of COVID-19 and the fallout for the global economy. Central banks across the world have signposted that interest rates will be low for an extended period. The Federal Market Open Committee echoed this recently stating that they cannot see an increase in rates until 2023. However, there are plenty of areas where the candidates' policies diverge, for this opinion piece we are only focusing on some of the economic and foreign policy. Subject Biden Trump COVID recovery Proposing to spend trillions to create new jobs in clean energy, manufacturing, and caregiving. Signed legislation

2020-10-15T16:06:24+00:00October 5th, 2020|

Brexit UK-EU Trade Talks: How will sterling be affected?

  History and understanding During the Brexit negotiations in 2017, the UK & EU agreed that trade negotiation could only start after the UK's withdrawal because such negotiations could not happen when the UK still had a veto capability in the EU. For this and other reasons, a transition period after Brexit day (31 January 2020) was defined to allow those negotiations.  The transition period started on the 1st of February 2020 under the withdrawal agreement.   The deadline is the 31st December 2020, a deadline which can be extended for two years, although the British government has declared that it will not apply for any such extension. In 2018 the UK conducted 49% of its trade with the EU, 40% with the Rest of World and 11% with countries that have EU trade agreements.   Figure 1: UK % of Total Trade 2018 Source: Department for International Trade / BBC https://www.bbc.co.uk/news/uk-47213842   Potential scenarios There are various types of deal frameworks available in these negotiations, with the UK said to favour a Canada style arrangement called the Comprehensive Economic and Trade Agreement (CETA). CETA provisionally came into force between the EU and Canada in 2017, this is a free-trade agreement removing 98% of the pre-existing tariffs between the two areas. A CETA agreement between the UK and EU would aim to get rid of most, but not all, tariffs between the UK and the EU, this does not cover anything in services, particularly financial services, which is key to negotiations

2020-09-17T15:22:25+00:00September 17th, 2020|

A Double Dip Recession or V Shape Recovery, How Will Sterling Be Affected?

By Jamie Jemmeson ACSI, MSTA at Infinity International Background The UK officially entered a recession following the Q2 GDP release in early August - a recession is defined by two consecutive quarters of negative growth. Whilst a recession was not unexpected, the position of the nation’s economy in comparison to its peers is somewhat of a concern. The official reading saw UK Q2 GDP contract by 20.4%, a record low. Compounding the concern for the UK economy is that this is the largest contraction for Q2 GDP amongst its peers in the G7. State of play The UK has not only suffered the highest number of COVID deaths in Europe, with 41,499[1] deaths at the time of writing but is also suffering from the deepest recession in the G7. This is not coincidental; the figures are intrinsically linked. The surge in deaths due to late lockdown dented economic confidence resulting in the dire GDP figures reported. Please don’t emigrate to Japan just yet – it’s not all doom and gloom. The monthly UK GDP figure, as opposed to quarterly detailed above, is likely a more appropriate reading of recent economic activity.  Given the fluid changes in guidance, travel corridors and easing of restrictions we have seen over the last few months, the figures are certainly more upbeat. The monthly figure for June reported an increase of 8.7% – a record single-month increase and slightly stronger than forecasts suggested, with May’s GDP figure also revised higher. This trend has not

2020-09-03T08:20:03+00:00September 2nd, 2020|

5 Looming Dilemmas of 2020 & the FX impact

By Jamie Jemmeson ACSI, MSTA & Tyler Betts, FX Risk Manager at Infinity International “You can't connect the dots looking forward; you can only connect them looking backwards. So, you have to trust that the dots will somehow connect in your future.” – Steve Jobs Steve Jobs’ philosophy of trusting that dots will connect may be very difficult to fathom in this current landscape; but who are we to question the man who created the world’s first trillion-dollar company. Infinity International will be providing content to our clients on several relevant topics covering a variety of possible concerns during these unprecedented times. To do this, we are drawing on our own experience, client feedback as well as the input from others in our network. Last month we covered a series on FX hedging and how this could assist your business in managing the current market volatility. This month we are looking at the topics which could impact on currency and potentially drive emotional decision-making surrounding FX hedging. In this series, we will focus on five key looming dilemmas of 2020 and what this may mean for FX. There may only be one or two ‘trend changing’ events in a normal year, that could significantly impact the direction of exchange rates; however, this year we have seen COVID-19 increase volatility with several other events on the horizon. 2020 has been a rocky road to date, but there are five further topics that could further drive market volatility. Each week we will cover

2020-08-21T09:45:21+00:00August 20th, 2020|

Could the US Dollar Continue to Weaken as We Head Toward November’s Presidential Elections?

By Jamie Jemmeson ACSI, MSTA at Infinity International It was a shock in 2016 when celebrity Republican nominee Donald Trump seized the White House against the odds; that said Brexit and Leicester City's Premiership crowning were also unlikely events. Four years on and President Trump's re-election campaign is looking wounded with his management of COVID-19 and the resulting fallout hurting his chances. Data from Real Clear Politics (RCP), a poll aggregator and news source, shows how his approval rating has slipped since the start of April; the height of COVID-19 which resulted in the loss of close to 20 million jobs at one stage. Fig 1 = RCP Poll Average[1] At the time of writing (24 June 2020), based on RCP betting odds aggregator, Democrat Joe Biden has a greater than 60% probability of winning the race to the White House (see Fig 2). However, ruling out President Trump would be foolish based on his accomplishments previously. However, it would not be a surprise if we see the nation's currency weaken as we approach the election as uncertainty increases. Fig 2: Betting odds[2] What does a Joe Biden win mean for the US dollar? While we recognise that there is a long way to go in the Presidential race, it is worth noting that markets often base value on the balance of probabilities which helps to explain and partly rationalise the reason why the US dollar is on the back foot. Since 1940 there has only been one incumbent

2020-07-29T16:14:21+00:00July 29th, 2020|