Pound falls to an 11 month low amidst fears of a hard Brexit and parity against the Euro

Yesterday saw more losses for the Pound, amidst no data and increased fears that we will reach no deal in Brexit negotiations.  It saw the Pound fall to the lowest level in 11 months against the USD, having fallen 2.5% in the last month against the Greenback and 1% against the single currency. UK trade secretary Liam Fox has issued a warning that there is a 60-40 chance that the UK will exit in March with no agreement, and it now seems the markets are beginning to bet as such.

This is concerning as these further losses come only days after we saw the Bank of England raise interest rates – and while this move was largely expected, the fact the Pound has lost ground only demonstrates the negative sentiment towards the Pound and the path we are likely on over the coming months. Analysts at Goldman Sachs suggest that now the hike is out of the way “markets can turn their attention to the Brexit process which will dominate GBP trends for the rest of the year”.

As such many analysts are predicting further losses for the Pound and following a highly likely no deal trade agreement at the EU summit on October 18th, this would leave almost no time for a deal to be struck by the final Brexit deadline of March 2019. In the run-up to the October meeting, this downside risk will begin to become priced in, and we could easily see rates return against the Euro to the previous lows seen in August 2017 – which is another 4% drop from where we are currently sat. Following that if the EU stand firm and no-deal can be reached by March it is feasible we could see GBP>EUR rates at parity levels 1:1 against the Euro, whilst against the Dollar and its aggressive programme of interest rate hikes, analysts warn of a potential 10% move from where we currently find ourselves.

Without a doubt, these are concerning times, so be warned that if you have any upcoming requirements, or if you are perhaps considering buying property in the future you should consider these risks. With markets heavily focused on Brexit politics, it sadly seems the rates are only headed one-way.

Doom and Gloom aside we may see some spikes in the market, and if they occur you may want to act on these and consider forward purchasing your currency in advance to protect your budget. It is possible you might be looking at a property purchase now of 200k Euros which could cost you 15k GBP more within the next 6 months. So whether you voted leave or remain, whether you are buying or selling, if that’s USD, EUR or indeed any other Currency, and ultimately if you think we will reach a deal or not, speak to your Currency Index today.

It would be remiss not to consider the high factors of risk at present, and we can offer a number of ways to protect your budget, or at least be your eyes and ears on the ground, watching rates for you so that you might act on a spike in the market and try to minimise the impact of Brexit on your budget.