Pound falls ahead of Brexit vote

Good morning. The Pound has fallen this morning ahead of this week’s votes in Parliament on Theresa May’s Brexit deal. There were hopes that progress would be made this weekend in talks between the UK and EU, but it doesn’t look like that has been the case. It’s now looking like the deal will be voted down again, as it was in January.

Due to this, Sterling has given up much of the gains it had made against other currencies in recent weeks. GBP/EUR has dropped from €1.17 to €1.15. GBP/USD has dropped below $1.30.

What is happening with Brexit talks?

As there has, as yet, been no breakthrough in talks, the most likely outcome now is that the deal will be voted down. MP’s will then vote on whether to leave the EU with no deal, which is highly unlikely. That leaves us with a vote on whether to extend and delay Brexit. In doing so, the uncertainty that has been keeping the Pound weak of late would also be extended, which could lead to rates dropping further.

Of course there is still time for the EU to make the concessions on the back stop necessary to get the deal through. However, given that MPs have effectively already ruled out leaving without a deal, there is now little impetus or need for the EU to do anything.

Will Brexit be delayed, and how could this affect the Pound?

We therefore expect Brexit to be delayed by at least 2 or 3 months. How this would affect GBP exchange rates is hard to predict. On the one hand, it would extend uncertainty and do little more than kick the can down the road. A ‘No Deal’ would still be possible, and so this could weaken the Pound. On the other hand, it would greatly reduce chances of a ‘Hard Brexit’ so could limit any losses. Either way, in the absence of a deal being agreed, it’s unlikely the Pound will strengthen.

Worried about Brexit affecting exchange rates?

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