Why has the Pound fallen today?
Theresa May has revealed some details about the proposed new Brexit Customs Plan. There are meetings today between the Prime Minister and Angela Merkel, but they don’t seem to be going as well as May had hoped. We’re hearing that Germany are said to regard the plan as ‘unworkable’. This is before they have even been discussed properly by the Cabinet, so it doesn’t bode well for those hoping there would be some progress with negotiations. There’s been an immediate effect on Sterling, and in the last hour GBPEUR has dropped into the €1.12’s against the Euro.
Brexit Customs Plan
This new Customs proposal is something that we’ve been talking about all week. It certainly has the potential to weaken the Pound further. It’s looking more and more likely that the EU will simply say that the plans aren’t workable. The UK government have come up with 2 previous proposals to keep frictionless trade with the EU. However, both were rejected by the EU. The latest proposal is said to have the best bits of both the previous offers.
I’m not surprised that the EU are unlikely to accept the new proposals. They’re also not very forthcoming with any alternatives, simply stating that the UK decided to leave, so the UK needs to come up with a plan. This can’t go on forever, and this continued uncertainty is starting to weigh on Sterling more and more. To me, it seems that we’re not going to make any meaningful progress with Brexit before the next EU summit in October. This means the Pound could potentially fall further in the coming weeks and months.
Protecting against rates falling
If you need to convert Pounds to Euros, Dollars, or any other currency, then you should consider how to protect yourself against the Pound dropping further. There are 2 ways that we at CurrencyForecasts.co.uk can help you do this.
The first is by using a ‘Forward contract’. You can freeze the current rate for up to 2 years by lodging a deposit of 10% of what you need to convert. This guarantees the rate and protects you against the rate getting worse.
The second way is by using a ‘Stop Loss’ order. This is where you instruct us to convert your currency if it drops below a pre-agreed level e.g. €1.12. This gives you a bottom line and a worst case scenario. If rates plummet, you’re currency is bought if it drops below this level. If it doesn’t however, you are free to take advantage of any subsequent gains. This allows you to take the chance of rates rising while still having protection. This is useful if time is on your side.
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