Brexit to drive exchange rates for some time

Brexit has been the centre point of blame since the UK made the historic decision to cut ties with the EU, and let’s be clear that the UK did not vote for soft Brexit, or Brexit-light as some like to call it. The British public voted to leave the bloc altogether, to restore a sense of Sovereignty and control what many considered lost when the UK voted to join the EEC in 1973.

The British public therefore want a hard Brexit, a complete removal from the single market. This is not, as many believe, to do with immigration as such. And whilst we come to terms with the shock result on the 23rd of June, I am of the opinion that the UK would be better off with Hard Brexit, not just to fulfil the wishes of the public, but to broaden our business opportunities with the wider market places.

Short to mid-term, it’s difficult to envisage how Sterling will recover against the majority of its counterparts. Brexit doom and gloom has been the agenda of a number of media outlets, financial institutes, business leaders and the Government’s remain campaign, which all in all, has done very little to help the moods of millions of consumers and businesses alike.

But what I consider less forgiving amongst the Brexit fiasco is the lack of contingency planning set out by the Government. If David Cameron had come out and stated the alternative, and provided reassurance to the British public that a Brexit would not be catastrophic, perhaps the current economic climate may have been different. Given that Brexit hasn’t even begun, and won’t until 2017, businesses should have been educated prior to the results which could have limited the loss in confidence.

And how will the climate look when the UK trigger Article 50, once the countdown begins, anxiety amongst the market places will surely rise with it?

Pound Sterling more sensitive to economic releases

Now the UK have been warned about the consequences of Brexit i.e. recession, investors will be looking out for any signs of its self-fulfilling nature. Falling house prices, check! Poor PMI data. check! Consumer confidence surveys, check! Economic releases that were once considered insignificant now find themselves in the spotlight as markets wobble with nervousness over what’s yet to come.

Media outlets will be quick to report on economic releases, given that a large portion of them are pro-remain, throwing more fuel onto an ever expanding fire. The message for them is clear, Brexit is bad, we told you so.

I wouldn’t wait to buy foreign currency

As mentioned earlier in the report, Brexit hasn’t even begun, which leaves the UK wide open to vulnerability. By the time the UK trigger Article 50, the FED could have hiked rates, the ECB may have the solution to Italy’s banking crisis and oil prices could well be on the rise again.

Today’s construction and industrial output reports could be the next big headlines. If the data bears positive it could be put down to pre-Brexit data, if it’s negative you can be quite positive Brexit will be the cause.

The NIESR report that precedes these releases at 3pm is where I see further weakness for Sterling. The report which looks at the last 3 months predicts growth up to the end of July, given the Bank of England’s decision to cut rates and forecasts, I expect the NIESR to cut growth predictions from 0.6%.

If you need to transfer a large sum of Sterling, I would consider what a further fall of two cents could do to your requirements. A £200,000 transfer could be €4000 more expensive on this morning’s rate for example. Now imagine what rates could look like when the UK finally begin withdrawing from the EU?

Don’t hesitate in contacting us today, being in the hands of a knowledgeable broker who understands the markets puts you in good stead. We’ve been trading for over 15 years and have seen many major economic events including the global recession since then.

Whilst current rates of exchange remain attractive, you may wish to get in touch with our brokers to discuss your requirements. Call our trading floor on 01494 725 353.


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