Recent developments on the Brecon and Radnorshire by- election have just announced that the seat, which had previously been held by the Conservatives for 5 years, has been given to Jane Dodds of the Liberal Democrats who beat Tory Chris Davies by 1425 votes and accounted for 43% of the total votes.
This brings Boris’ majority to just one seat in Parliament, possibly making it more difficult for the PM to change legislation and pass any key votes. This could be seen as a big boost to the Pro-remain side as they have campaigned for a second referendum in the hopes that the general public would prevent any further Brexit negotiations.
In extension to the difficulties Boris Johnson faces in passing any amendments, his bold statements about putting the UK into a “new golden age” and overtaking the European economic powerhouse of Germany have not been sufficient in preventing further reductions in sterling rates against its major counterparts.
Whilst the currency market is well known for its volatility, exchange rates surrounding the pound have made headlines this week amidst the political tensions that Brexit is causing.
The GBP/EUR interbank exchange rate this week fell to lows of 1.088 which are rates not previously seen since September 2017. GBP/USD interbank rates also fell to the weakest rates recorded since March 2017 at 1.212.
Considering that, GBP/EUR and GBP/USD have been consistently falling since March of this year with sterling potentially weakening further as the October deadline looms closer.
This follows Johnson’s statements suggesting that a no-deal Brexit is “now a very real prospect” and is “turbocharging” his efforts to leave the EU by the 31st of October. Seema Shah from Principle Global Investors has stated that "it looks like this juggernaut cannot be stopped, we do expect sterling to keep falling”.
It is not all bad news though. With sterling rates on fresh new lows, it has provided investors holding other currencies with the opportunity to purchase the presently weak pound.
Back in Mid-June the Bank of England (BoE) Governor Mark Carney retains interest rates at 0.75% in order to meet the current inflation target of 2%.
Yesterday, the decision was made to keep interest rates the same as the BoE drops its growth forecast to 1.3%. In fact, the insignificant progress that the government has made to achieve a trade deal with the EU has spiked the probability of the UK heading into a recession to 33%.
With Johnson’s bold personality and being a powerful influencer to the public, some have dubbed him the UK’s Donald Trump.
He has continued this confidence into this week’s headlines where Boris has stated that he would not sit down and further discuss the options available with the EU unless they revoked the Irish backstop policy, a factor that had a strong bearing on the decision to extend the Brexit deadline earlier this year.
With such volatility on sterling exchange rates, you may wish to get in contact with your account manager here at Foreign Currency Direct for an update on 01494 725 353.
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