GBPEUR Drops to 9 Month Low

8 August, 2018

Rob Bastin

Yesterday’s trading was another day absent of any data in what is a quiet week for the eco stats. Unfortunately for the pound the current trend and building uncertainty surrounding Brexit means that no news is bad news. GBPEUR dropped to a 9 month low yesterday with exchange rates now down 1 cent from the open on Sunday night. With every week that goes by now the concern and probability of a Brexit ‘no deal’ is increasing, which would likely be the worst case outcome for Sterling come October.

It is, however, important to recognise that simply getting a deal done will not guarantee an improvement in rates, as within this scenario there a number of different outcomes that are possible. The chances of a deal being agreed by October currently vary around the 50% mark, however, within the 50% chance of getting a deal there are only 1 or 2 outcomes that would completely satisfy the markets depending on how ‘hard’ or ‘soft’ the agreement is. This means there are still several outcomes in getting a deal where rates would still react in a negative way and some outcomes where the Bank of England have said they would need to consider cutting interest rates back again which would be terrible for the pound.

Whilst no-one knows what the outcome will be at this stage, the balance of risks are heavily weighted the wrong way for those looking to buy currency from Sterling, and as such, the market is fully expected to continue pricing in this possibility over the coming weeks. If you have a property to complete on in the coming months, or indeed are actively looking with a view to buying before year end; ask yourself do you have the financial budget and flexibility to add 10% to your overall costs? Even if you do, is it something that you wish to gamble on with a 50/50 probability? If not then contact your broker today to discuss your options to either manage or remove this risk using our Forward Contract or Stop Loss Orders.