Boris deals GBP blow as Brexit backed.
23 February, 2016
Yesterday was not dominated by data but rather by Boris Johnson as he delivered a crushing blow to both Cameron and the E.U stating that he would support a Brexit. As a result the pound saw a severe drop throughout the day and was close to having the worst day since 2009 in terms of the loss, only adding to its fall over the last couple of months – 4% against the Dollar and 10% against the Euro since December. GBPs losses were saved somewhat against the Euro as he addressed the House of Commons yesterday, however in the early hours of this morning the rates dipped again, taking the losses to around half a cent against the single currency.
With analysts suggesting that this sentiment of uncertainty, not only within the Conservative party but also in GBP/EUR will continue this could see further losses for the pound in the coming months. “Weakness appears to reflect an increased probability of Brexit after political reaction to the new deal on EU membership was more split than the PM would have hoped,” said Sam Hill, senior UK economist at RBC Capital Markets.It is the real possibility that the UK could leave Europe that is causing the pound to lose heavily.
Credit Agency Moodys have said that the economic costs of a decision to leave the EU would outweigh the economic benefits as investment would suffer and exports would decline. Whilst another credit agency Fitch suggests that in fact a Brexit would only moderately affect the economy should trade deals be secured. What is for sure is that it is this exact type of uncertainty which is not encouraging the pound to find any strength, and whilst the Euro and Dollar remain strong be prepared for further GBP losses in the coming weeks and months.
Those of you with upcoming requirements for either EUR or USD, or indeed any currencies bought from the Pound may like to strongly consider your options now, as uncertainty breeds and we close in on the referendum it is highly likely we will see GBP rates suffer. Speak to your Currency Index broker today who can offer some friendly guidance on forward contracts and how you can secure your exchange rate for future use today and avoid these costly drops in rate.
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