Although the ongoing Brexit discussions hasn’t helped the pound sterling, it stood strong on Wednesday 19th February, seeing an increase of 2.7%, an improvement based on the 2.5% rise seen in July. The inflation has been attributed to increased spending on clothing, travel and entertainment.
The data released by the Office for National Statistics goes against economic predictions, who predicted a Consumer Prices Index rate of 2.4%.
Despite the rise, not all segments of the UK’s spending market saw an increase. In fact, household goods, furniture and mobile phones had a negative impact in relation to inflation.
GBP was up 1.0 compared to EUR at 1.12. Despite the promising rise, Brexit negotiations meant that the pound-to-euro exchange was 1.1247 following proposals on the Irish Border, which was previously 1.3215.
This means that those expecting the exchange rates to improve in relation to pound sterling could find themselves disappointed when shopping for foreign exchange, as the rates are often based on based on the economic actions of a Government.
Discussions have been in place for some time in relation to the Irish Border, with both the EU and UK wanting to avoid a hard border. However, how this will be implemented is still being debated.
Current Plans for the Irish Border
Ireland is keen to ensure that it remains open to people and trade, and the backstop plan is effectively an insurance policy that ensures Ireland doesn’t suffer any repercussions should a no-deal Brexit occur
It’s also evident that Ireland doesn’t want to affect the normalisation that has contributed towards greater trade following the Good Friday agreement and the cross-border cooperation currently in place. Police have even stated that the introduction of a hard border could mean that crossings a potential target for violence.
The EU state that although checks don’t have to be carried out at the border, stating that technology could be used to carry out customs checks at different locations.
Theresa May stated that her own Chequer’s plan was the only credible solution put forward that would ensure that no hard border was in place.
The EU had put forward a backstop plan, that would mean Ireland was governed by the same trading rules as their own. May rejected this plan, stating that it would divide the UK.
The concerns surround the single market being protected, and how detrimental it could be allowing inferior goods to enter Ireland, which also means they could reach other parts of the EU.
The Pound Sterling Forecast
As expected, the discussions and uncertainty surrounding Brexit will go on to affect GBP, but it’s unclear as to how it will be affected until a firm exit strategy has been put in place that both the EU and UK agree with.
The ongoing Brexit negotiations between the EU and UK mean that at this point in time, it’s difficult to say what the pound sterling forecast is moving forward.