Further turmoil for currency markets

The boss has resigned despite a weak opposition, the value of Sterling has fallen, and we are heading out of Europe – the England football team have delivered a perfect sporting reply to add to the political and economic chaos we are seeing at home.

Despite efforts to calm the markets yesterday by George Osborne and then in a memorable session in Parliament, markets remained in downfall due to uncertainty around the main Brexit questions: when will the UK trigger Article 50, and who will do so? Will Jeremy Corbyn survive as Labour leader? Will Scotland now push for independence again? Is this the beginning of the end of the EU? What will happen today, tomorrow or next week, never mind who will be the next Prime Minister? The chaos in British politics is hardly helping to shore up any clear indications of a strategy for the UK’s direction in the coming months, and David Cameron’s delayed resignation on Friday, intended to create stability and calm, does not appear to have worked. Consequently the Pound, along with UK financial markets, fell again yesterday, posting losses of around 1% against the Euro and US Dollar, and in doing so fell to a 31-year low against the American currency.

It seems that we are in for a period of continued volatility and uncertainty, with the Pound first in line to suffer. The hope for those of you buying property abroad or importing goods from overseas, is that a clear plan and some strong leadership will help the Pound when they arrive, but the question seems to be how long that will take and to what degree the Pound will fall meanwhile. Certainly this is a tricky time to second guess the markets.

Former Bank of England Governor, Mervyn King, said yesterday that there was no reason for people to be particularly worried, and that “in the long term he said it was likely that the impact [of Brexit] would be much smaller than either side expected.”

Today’s developments
This morning we have a speech from ECB President, Mario Draghi (9am) and David Cameron is set to meet EU leaders (who have already said that talks on a deal for the UK cannot begin until Article 50 is invoked) for the first time since Thursday’s vote. Labour MPs are also due to vote on a motion of no confidence in Jeremy Corbyn, and Nicola Sturgeon will address MSPs on over Scotland’s future. It is hard to see how any of these events will help the Pound in the short term.

So while we have seen a dramatic and sudden fall in exchange rates since the shock referendum result in the early hours of Friday morning, the message is that there could be further negative movement for the Pound, for some time, and markets as always will have the last say. If you have currency to buy or sell in the coming months, do contact us at Currency Index so that we can keep you updated with the latest developments and help you navigate these uncharted waters as best as we can.

Roy Hodgson for Prime Minister, anyone?