Worrying times for Sterling

15 January, 2020

Ashley Finill

We are now only a couple of weeks away from the UK’s exit from the European Union. For what was seemingly at first Sterling positive when the conservative’s won a majority on election day paving the way for separation from the EU with promises of a deal being struck we have since seen a reversal in the rates pinning sterling down to losses across the majors. Post election had brought 3 year high’s on the Euro and the dollar with all looking well for sterling for the foreseeable but has somewhat been short lived with a shift in momentum in the past couple of weeks with due to a few spanners being put into the works.

Last week two members of the MPC at the Bank of England have voted in favour for an interest rate cut and then over the weekend, another member had been reported to also give the nod to their motion. It is now being reported that interest rate in the UK could be cut as soon as the end of this month which will more than likely be a further blow for sterling and scupper any turnaround for the Pound. The current market may have been acting cautiously due to interest rate reports but should the cut take place then we could see a much sharper fall in rates should news break later this month.

Another worrying event for which could couple sterling’s woes is a trade deal yet to be agreed with the EU with reports suggesting that any sort of agreement is further away from that once thought with a member of the EU has been quoted to say that a trade deal is impossible. If a trade deal is not agreed within the next year with the EU this could be effectively a no deal Brexit.

Both these events mixed with predicted negative UK economic data could see Sterling slump to the lows seen last year. If you have deposits or balances due on property purchases it may be worthwhile looking at locking in your currency in with a forward contract, this will remove your exposure from the potential of a Pound fall whilst taking advantage of today’s rates.