The Pound last week hit its lowest level against the Euro for over 10 years

23 March, 2020

Robin Haynes

The Pound last week hit its lowest level against the Euro for over 10 years, and against the US Dollar since 1985.

A combination of the devastating economic impact of Coronavirus-based social distancing measures & business shutdowns, and the under-reported effect on Brexit trade talks (which are not happening) mean that the UK currency has been hit particularly hard.

An emergency interest rate cut to 0.1% and a massive package of fiscal measures to keep the economy from grinding to a catastrophic halt, were not enough to stop spooked traders selling off sterling, resulting in one of the most volatile weeks in the history of financial markets.

The US Dollar in particular, has become a safe haven bet for investors, and the rapid appreciation in the value of the Greenback was unprecedented.

With financial uncertainty a common theme around UK dinner tables already, those of you who need to send funds abroad in the coming weeks are left with a difficult decision. How long will the Pound take to recover? It could be weeks, months, or longer, and nobody can predict what will happen or how long it will be before a sense of normality returns to the world. When it does, Brexit trade talks now look extremely unlikely to be completed by the end of 2020, and assuming Boris Johnson sticks to his deadline, that means we will be leaving the EU without a trade deal on December 31st. Markets had been betting on some kind of deal being hammered out in time, but sterling is very unlikely to recover to the levels of only a couple of weeks ago, unless there is either a miracle or a deadline extension.

There is very little on the economic calendar that could give the Pound a boost this week – February’s inflation figures, and a scheduled Bank of England meeting, do not seem particularly relevant at the moment. Chancellor Sunak is likely to announce further economic stimulus this week, perhaps for the self employed and other groups who have not yet seen any help from the Government – but while these may help money keep moving, the question is what will the effect be on government debt when everything works out? A flagship of recent governments, it looks like we will all be paying for this crisis for many years to come.

We will remain open, with a skeleton staff working either from home or segregated areas in our offices. We will be able to process payments on time, and you can rest assured that as an FCA regulated business we are well capitalised and prepared to weather the storm. Your funds are held either in client or safeguarded accounts, and we are ready to help in whatever way we can to minimise the disruption and expense of the crisis for our clients.