Pound remains vulnerable – Can you “Brexit-proof” your purchase?

25 July, 2018

Matthew Boyle

Yesterday saw both weak Eurozone and US data released, however the respite for the struggling Pound was minimal. Currently, the Pound remains very vulnerable, as both Political and Brexit uncertainty remain prevalent in the UK, and as the number of analysts that point to the downside risk seem to increase by the day. Analysts at ING the large Dutch-based multinational, yesterday downgraded Sterling’s outlook in the short-term, citing both Brexit uncertainty and fears as increasing, and suggesting that the Pound is headed towards post Brexit lows, which for GBP>EUR rates would mean a drop of a further 4-5%.

And against the US Dollar, and its programme on interest rate hikes some analysts are suggesting that we could see a drop of 8-10%. Whilst some hold out hope that we may still see the Bank of England raise their own interest rates in August, recent inflation figures suggest that this is unlikely. And given Bank of England Governor Mark Carneys generally dovish approach towards any hikes, this is starting to seem like more of a long-shot.

Indeed, looking at how flat GBP rates remain against poor data from elsewhere (which would normally see rates move up) it is starting to become more apparent, that the odds of any notable increase between now and the Brexit deadline of October are lengthening. With no data of note out today, the Pound will have to continue to rely on weak data from elsewhere, otherwise, we could see the rate begin to drop again. Add to that that if no Brexit deal is reached in October, we could well see the Pound in free-fall and should that happen we could be looking at a long journey for rates to return even to their current levels.

Those of you reading this with requirements or property purchases in the coming 6 – 12 months may be concerned over this and might be wondering is it possible “Brexit-proof” your purchase. Currency Index offers forward contracts – these allow you to secure a future rate of exchange with only 10% of the required funds. This means that if you have a purchase of 100k in the coming months you can secure your rate now, and you only need 10k to do so.

This allows you to know exactly what your money will buy ahead of your upcoming purchase, but also prevents your cost from increasing should the rate drop! Given the current outlook, this may provide an invaluable option for many of you as if the analysts are correct and the worst does happen, your purchase of 100k could increase by several thousand pounds over the coming months.

So, if you are concerned about the impact of Brexit on exchange rates and would like to look at the option of protecting all, or even some of your required funds, speak to your Currency Index broker today for some friendly and professional guidance.