It seems the pound has managed to build some kind of stability after last week’s heavy losses, with rates remaining relatively range bound against its major currency counterparts, sitting at 1.08 against the euro and 1.20 against the dollar on the interbank exchange.
Whether or not foreign currency will become cheaper seems to boil down to a question of probabilities if you go by what the major investment banks are saying.
Credit Suisse are suggesting the slight gains from the start of this week could be short lived. Given how unlikely it is that the UK will be able to leave the EU with a deal before the end of October, the uncertainty is growing and according to their trading desk, further drops in value could arise.
Furthermore, when you consider Bloomberg’s latest poll of banks indicated the likelihood of a no-deal outcome has risen to 30%, nearly 3 times the reading when asked back in February, it is indeed hard to imagine sterling holding its ground much longer.
On the other hand, former Finance Minister Hammond said yesterday he is confident Parliament would be fully justified in blocking a no-deal Brexit at this stage, given the bulk of PM Johnson’s advisers currently “putting the UK on an inevitable course toward a no-deal Brexit” are unelected and in large do not represent the nations interests.
Corbyn is leading the headlines this morning with his push to take temporary leadership should his bid for a vote of no confidence in Boris Johnson prove successful. Talk of a snap election and a second referendum could dent the probabilities of a no deal Brexit and so renewed volatility for sterling could surface.
Aside from the Brexit question marks, sterling holders’ prospects improved slightly during yesterday’s trading as the Office of National Statistics produced their latest inflation figures for the UK.
The readings hit a 3-month high, jumping to 2.1% for July, smashing through the originally expected 2.0% The Bank of England’s concerns for subdued growth levels in the UK has been well documented so far this year, with Brexit uncertainty anchoring business confidence for the foreseeable.
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Very good. Very efficient. Excellent rate.