EU want some? Pound down as UK posed for potential No deal Brexit

28 February, 2020

Matthew Boyle

Yesterday saw a continuation of the Pound being sold off in a week where concerns for a No Deal Brexit again raised its head. Whilst Boris Johnson released his mandate to UK trade negotiators, Michael Gove addressed parliament, and both reiterated the stance that the UK would be prepared to end negotiations with the EU in June and that we are fully prepared to leave with No Deal if the EU do not meet their demands. Not helped by a strong single currency, this has seen the Pound drop around 4% against the Euro in the last 4 days, whilst against the greenback in the same period we have seen a 2% drop. Issues over trade, fishing territories, and the European Court of Justice seem to be real sticking pints for the UK it seems, and concerningly we haven’t even begun the talk process!

With Boris taking this stance, and having torn up the right for the UK to extend, or take No-deal off the table, it now seems a probability talks will break down quickly, the UK will pull out of talks by June, and we will be looking at a No deal Brexit as a result. This very real fear is being highlighted by the drop in exchange rates in the last few days, with a further 8% drop very feasible in the coming months, (maybe as early as June) taking us back to the GBP>EUR lows we saw last year.

Euro buyers may want to consider their position immediately – remember you can secure your currency with only 10% using a forward contract.

Euro sellers may like to consider casing in these 4% gains we have seen in the few days as who knows- maybe Boris threats will make the EU to yield, and if the Euro weakens or we see banks profit taking the rate could jump back up.

Whilst No deal Brexit dominates the Pound, coronavirus dominate the news and is certainly affecting the global markets, with the Dow Jones recording the biggest one-day points fall in history as a result of a massive sell off.

With uncertainty prevalent in the market this does bring one certainty…… that rates will be extremely volatile.

If you have any upcoming requirements you would be well advised to call us today to discuss some of the ways we can help recue your cost and mitigate risk in such uncertain times.