Are sterling exchange rates stuck in limbo?

We once again find ourselves stuck in the trading range of 1.12/1.13 for GBP/EUR, a range that has been fairly consistent since the Brexit vote of June 2016.

Over the weekend the European Union agreed to support Prime Minister Theresa May’s latest Brexit bill, something that you would have expected to lend support for the pound across the board, yet this has not materialised – but why?

The overriding feeling is that this divorce agreement, although passed by Theresa May’s cabinet, will not be passed by parliament on the 11th December. This in theory, will leave sterling exchange rates vulnerable to sharp losses. However what is the alternative? The alternative of course is a scenario whereby no agreement is reached and we face Brexit with no-deal. This once again should be a cause for concern for the pound with the scaremongers suggesting the pound could fall by as much as 10% – however these are are both scenarios the market is fully aware of and, therefore, why has the pound not fallen further?

Is a no-deal Brexit an option?

Of course it is, however with this scenario firmly on the cards, due to the latest Brexit bill being so unpopular, it would appear other options are more viable to avoid a no-deal Brexit at all cost. These options being a second referendum or an extension of the divorce deadline. Both these, in my opinion, are more likely than a no-deal. They would rather continue to kick the can down the road than face the situation of a no-deal, and for this reason I believe that Brexit is going to continue to haunt us for many more months and this stagnant range is set to continue.

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One Comment on “Are sterling exchange rates stuck in limbo?

  1. Pingback: Mark Carney's stark warning for the pound - Currency Forecasts

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