Sterling has gotten off to an extremely volatile start to the week, suffering heavy losses across the board, with PM May delaying the Brexit vote, throwing her role as Prime Minister and indeed the UK’s status with the EU into arguably it’s most vulnerable position of her tenure so far.

Currency Pair% Change in 1 monthDifference on £200,000
GBPEUR3.3%€7,800
GBPUSD3.5%$9,200
GBPCAD1.5%$5,200

By delaying the vote less than 30 hours before it was due to take place, it seems that all 3 major possibilities remain on the table, 2 out comes of which could severely hurt sterling.

There does seem to be quite a clear picture materialising from a currency perspective. If the PM is able to miraculously renegotiate with the EU and get the block to reconsider its stance on the Irish back stop issue, then I believe there is every chance the pound will surge back to the multi month highs we saw last month, into the 1.15s against the euro and beyond. Although PM May was laughed at in Parliament for suggesting the door remains open yesterday this does remain a slight possibility.

Her meetings with the Dutch PM Mark Rutte and German Chancellor Angela Merkel today could prove pivotal in regaining momentum. Importantly, this coincides with this morning's average earnings release from National statistics. The release is due to fall in line with the Bank of England’s projections so it may well provide support to sterling.

This could well prove to be the last opportunity for foreign currency buyers to consider their options before sterling deteriorates further. It’s certainly worth getting in touch with your account manager to detail your requirements and limit your exposure as much as possible.

UK production and budget also in the spotlight

Odds stacked against the PM and the pound

The general consensus however is that the odds are stacked against her. This was reflected in the rates yesterday, with the pound falling heavily yesterday to hit the low 1.10s against the euro and the mid 1.25s against the dollar. The reality is, there has never been more scope for the PM to be ousted. There is still plenty of time for a vote of no confidence to materialise and the very real prospect of another general election.

This will open up a whole new bracket of political uncertainty with the prospect of a Brexit no deal, which is likely to have catastrophic effects on sterling exchange rates, with foreign currency likely to become considerably more expensive for the foreseeable future.

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