Brexit deal crisis devastates the Pound
16 November, 2018
As has been widely reported yesterday was a devastating day on the UK financial markets, with stocks and the Pound taking a significant dive following the fallout from Theresa May’s hugely unpopular draft Brexit deal.
Initially, the news that Theresa May had persuaded her cabinet, during a 5-hour meeting on Wednesday afternoon, to back her deal, was greeted positively with Sterling pushing back up towards the recent 6-month highs against the Euro overnight into Thursday morning. Then 9 am came and the Pound went off a cliff with the news that Brexit Secretary Dominic Raab had resigned. Followed an hour later by Esther McVey, and a number of lesser luminaries, the Pound was now in freefall. Theresa May was then forced to spend 3 hours answering MPs questions on her deal in the Commons, and the writing was on the wall – MPs from every party, her own included, didn’t like the deal and simply wouldn’t back it’s passing through the House.
Backbench MP and prominent Brexiteer Jacob Rees-Mogg, openly challenged the Prime Minister in the Commons, asking why he shouldn’t send in a letter of no confidence to the 1922 Committee, and her answer obviously didn’t satisfy him as he did exactly that and submitted his letter shortly after the Common’s session ended. Theresa May sort to shore up her position with a press conference at 5 pm, but her blind faith in her deal wasn’t fooling anyone, and so the Pound continued to struggle.
This morning brings news of further possible cabinet resignations from Michael Gove and Penny Mordaunt, the former having supposedly also turned down the role of Brexit Secretary yesterday.
The result of all of this is that the Pound is now two cents down against the Euro and the US Dollar in a little under 24 hours and critically doesn’t look like stopping there. The upshot of all of yesterday’s news is a significantly increased chance of a No Deal Brexit, a General Election and/or a Tory Party Leadership Challenge, all of which bring with them a huge amount of uncertainty and fear of unprecedented repercussions. The markets hate uncertainty and investors will simply not support something as risky as the Pound now appears to be, and so we can almost certainly expect to see further drops.
For those of you with an upcoming currency purchase, it is essential that you stay in very close contact with your CI account manager to be kept informed of exactly what is happening, and to discuss your options. It is possible to secure your currency now using a forward contract, even if you do not need the currency for some months, thus negating the risk of continued drops for the Pound – ask us how.
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