Pound hits 5 months lows, more to come?

18 June, 2019

Matthew Boyle

Yesterday we saw the Pound hit new 5 month lows against both the Euro and USD. As the Tory leadership battle wages on in the background, markets are preparing and positioning once again for a potential no-deal come the impending Brexit deadline October 31st. And whilst Boris has said he wants to get a Brexit deal, this could perhaps be a ploy to gain power, as “Bojo” is known for his hard stance towards Brexit, and many times before has said he would accept a No-deal, even at times seeming to lean towards it.

Whilst Boris says that no-deal should not be feared, the currency markets would disagree. When a No-deal Brexit was looking probable on previous occasions GBP>EUR rates were 4-5% lower than they are sat currently, and as such the likelihood of Boris taking power and the increased chance of a No-deal could well see rates continue to slide.

Some Bookmakers have Boris at around 85% likely to to win, but then to add to the current uncertainty also suggest that we have around an 80% chance there will be a general election this year.

This increased uncertainty does the Pound no favours. At present the Pound is receiving little backing, and this has been visible in the sell-off we have seen in the last 6 weeks with it dropping around 5% against many currency pairs. Should the tory leadership be won by someone with a softer approach to Brexit- perhaps Gove, Hunt or the newly favoured Rory Stewart, we may see a recovery from this drop. But at present the market seems to be positioning for a No-deal/Hard Brexit under Boris Johnson.

Whilst rates are the lowest they have been in 2019 against many pairings, readers may like to consider this ongoing uncertainty and the resulting impact upon rates and there upcoming purchases. There are tools we can offer to help mitigate your risk, so speak to your Broker today to help remove some of this, and before we perhaps see things get worse.

Whilst market focus lies heavily with the Tory Leadership battle at present we do have some Ecostats out today. At 09.00AM we have the German ZEW sentiment survey.

And also notable central bank speeches from Europe and the UK – ECB president Draghi at 09.00 AM and 3.00PM, and also Bank of England Governor Mark Carney talking also at 03.00PM.