As I’m sure all our readers will know, the last 24 hours have been extremely influential for Sterling exchange rates. Initially it seemed that the draft Brexit agreement would be agreed by the Cabinet, and GBP/EUR rates were as high as €1.1550. Much can change in 24 hours however, and at the time of writing, Sterling has weakened by over 2%, dropping to €1.1260 against the Euro and $1.2787 vs. the US Dollar.
Another reason for the drop is a strengthening Euro, on news that the European Central Bank will soon be ending their stimulus measures.
Will the Pound fall further?
I think there could be more trouble in store for the Pound if Theresa May faces a vote of no confidence. I mentioned earlier in the week that if the cabinet did not agree the deal, it would open a Pandora’s box of uncertainty, and that’s what is currently happening. Will the deal get voted through parliament? Will May survive as leader? Who would replace her? What would that mean? All of this uncertainty is likely to keep pressure on the Pound.
There is even the chance that we could end up leaving the EU with no deal, in which case the Pound could collapse.
What is the problem with the draft agreement?
The key objections to the draft agreement are the fact that the ECJ retain more control that had been envisioned, and the wording of the customs union. This is key. In effect it is saying that there is a backstop that means the UK will be in a customs arrangement indefinitely. Being permanently tied to EU trade rules mean we would be unable to strike trade deals elsewhere, arguably the key benefit of leaving the EU. Furthermore, the draft states that this UK wide customs union would form the basis of any future trade deal. This understandably is not acceptable.
Expect further volatility today and possibly more resignations. If you need to convert currency, you need to take action to remove your exposure to the currency markets, which are at their most volatile in a few years.
Take action to protect your currency requirements
Contact us today to discuss how you can take advantage of our currency exchange services. We offer exceptional exchange rates, ways to freeze the current rate for up to 2 years, and also things like Stop loss and Limit orders. It costs nothing to have a quick chat with one our experts over the phone, and it does not obligate you. Do not simply watch the rates moving against you hoping things will improve, take control of your currency requirements today by making a free enquiry.