The Pound drops in value (Daniel Johnson)
The weaker Pound hits the Retail sector
Retail data is starting to filter through and the problems caused by Brexit are starting to appear. The weaker pound is causing retailers to pay more for their goods and as such they are raising prices on their products. The consumer is now reluctant to purchase and we are seeing figures fall as demonstrated by NEXT’s recent sales data, a fall of nearly 12%. Marks & Spencer’s figures are soon to be released and there is also expected to be a fall.
We could well see a surge in inflation. In this case inflation will not be good for our economy, wage growth will be unable to keep up and the pound will suffer as a result.
What will effect GBP/EUR during 2017?
The main factor in Sterling weakness is the uncertainty surrounding trade negotiations post-brexit. The Supreme Court Judgement on whether parliament will get to vote on the evoking of article 50 could dictate GBP/EUR levels. If parliament does get the vote, this means there is the possibility of a soft brexit and we should see the pound rally. I think this is the likely outcome and I would expect the ruling to come through between the 12th-17th January.
There are due to be three elections involving EU countries throughout 2017. All of which could be won by right wing parties who have intentions to hold referendums. If one of these referendums comes to light it could cause serious damage to Euro value. Sterling fell nearly 20 cents against the Euro due to Brexit.
Keep also in mind the dire situation with Italian banks, terrible inflation and the Greek debt crisis and the Euro could be in for a very rough year.
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