Monday, 19 November 2018

Monday, 19 November 2018

Brexit and the exchange rate

4 potential scenarios as we see them

Just over one week ago, the GBP to EUR exchange rate had hit the best price in over a year with hopes that a new Brexit deal was ready to be done- these hopes were quickly dashed after the cabinet had actually approved the deal followed by several high profile resignations in Govt.

Since then there have also been calls for a vote of no confidence in the Prime Minister with some letters actually going into the 1922 committee - today, it not known whether there are enough letters to trigger this challenge or not.

Over the weekend, the PM has been actively promoting her deal around to gain support- and it seems that many members of Government are willing to back the PM, but perhaps only after some changes to the current deal.

At this point, it is pretty unclear which direction things will move - the 4 potential scenarios we see are :
  • The UK & EU conclude the deal, and it is approved by House of Commons (leading to Sterling strength)
  • The UK & EU make their deal, and it is voted down by the House of Commons- potentially triggering a vote of no confidence in Theresa May (Undoubtedly this would lead to Sterling weakness)
  • An immediate vote of no confidence (Again creating Sterling weakness)
  • Changes to the deal being made, and then being presented to the EU (One assumes resulting Sterling strength)

Economic news and figures are irrelevant while this all of this is happening- as the £ will only really move on political news.Therefore if you have an upcoming transaction please speak to us and our currency partners about methods to hedge yourself against the volatility in the market.

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