GBPEUR sees biggest drop in 2 years as Brexit uncertainty plays on
19 November, 2018
Last week was a turbulent one for the currency markets. Following news of cabinet support for Theresa Mays Brexit plan, we saw rates spike to a 6-month high against the Euro. However, these highs were quickly eroded as resignation letters flew in and it became quickly apparent it was very unlikely to make it through parliament, and that Theresa May might be lucky to keep her job. Many MPS publicly posted their letters to the 1922 committee and their no confidence in PM May, and as a result, this saw GBPEUR rates drop by 2% in little over 12 hours and the biggest single-day drop seen in over 2 years. And whilst some are praying for a No Brexit, it seems the markets are perhaps preparing for a messier no-deal, which is being reflected in the rate.
All eyes this week will be focussed on Theresa May and whether she can hold onto power. With the media reporting that over 20 letters of the 48 required to trigger a leadership battle have been sent, it does seem like she is on thin ice. However, with few Tory MPS who offer a credible alternatively there is the possibility that if a battle was triggered, she would win. But with the DUP and SNP publicly withdrawing support and it seemed mathematically impossible for her to get her bill through parliament, downside risk to rates will continue to be very high. And with little data out this week, markets will remain to be sentiment driven and highly volatile.
Should you have any upcoming requirements speak to your Currency Index broker today for some guidance on how to help remove the risk in such an uncertain time – with rates dropping 2% and the cost of 100k transfer increasing by 2k GBP in a single day last week, a leadership battle or failure to get the plan through parliament will only see this worsen, and quickly. Those of you reading this may like to consider this, and the option of a forward contract which can help prevent your costs increasing in a dropping market.
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