As regular readers will be only too aware, it is the continuing uncertainty over the UK’s departure from the EU that is keeping the Pound under pressure of late. I’m afraid that today’s post will cover the same subject due to its likely influence over the coming weeks.
We are as weary of discussing the subject as I’m sure you are hearing and reading about it, but it’s likely to have a huge impact for anyone that needs to exchange currency in the next few months. So, let’s move on to see what’s happening and how it could affect the Pound.
(I promise not to use the ‘B’ word!)
My colleague Michael gave a good outlined of the current climate in yesterday’s post. Today, I will take a look ahead at the timeline that you should be aware of if you need to exchange currency at the best exchange rates.
EU Exit timeline and the effect on Sterling exchange rates
Over the next few weeks, Theresa May will be campaigning to get the public and parliament on side, to help increase the chances that her deal can get voted through parliament. The vote will take place on the 11th December, and the debate is likely to go late in to the evening before the result is known. Before then, there are some key events to watch out for that could change the consensus of what the result will be, and Sterling is likely to be affected as this consensus changes.
Wednesday 28th November – Today and tomorrow, the HM treasury will be providing an analysis of the long-term effects leaving the EU could have on the economy. I don’t think this will have much of an effect as it will be pure speculation. Government economic forecasts do not have a particularly good reputation of late. Nobody even knows what a UK/EU free trade deal is going to look like, so trying to forecast 15 years into the future would be pure conjecture.
Thursday 29th November – The FCA and the BoE will also give their impact assessments of the withdrawal agreement. Again, this is most likely to be a tool to be used as a lever against MP’s that are threatening to vote down the deal. Even the most gloomy of assessments is unlikely, in my view, to harm the Pound too much as it won’t provide any new information for the markets to react to.
Monday 3rd December – Theresa May starts her campaigning across the UK in a series of events to try to sell the deal. Also today, the Treasury Select committee looks at the Withdrawal agreement and future framework. This meeting goes on for a couple of days and will call witnesses such as the BoE Governor Mark Carney, and chancellor Hammond. *update* new info suggests that the UK will also publish its ‘Legal Position’ on the Brexit deal, which could contain interesting information for the markets to digest.
Tuesday 11th December – The key Parliamentary vote, with the result expected around 10pm. If a deal is agreed, expect some semblance of stability to return to the currency markets. If it is not agreed, then I imagine there will be a plan B that avoids leaving the EU without a deal. If so, markets will react to this. It could be something like an extension of the transition, a return to negotiations, a vote of no confidence in the Prime Minister, or even a General Election. These are uncharted waters and there is no precedent to gauge how the markets would react.
Protecting yourself against currency volatility
As you can see then, there’s lots happening in the next few weeks and there is no way to foresee the effect this might have on the Pound and exchange rates. A prudent and sensible approach for anyone that needs to exchange currency, is to take steps to reduce your exposure to the market so you are not caught out if the market moves against you.
Here at CurrencyForecasts.co.uk we offer various tools to help our clients do just that. You can freeze the current rate for up to 12 months, or place triggers in the market to trade if the rate reaches a particular level.
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