Why is the Pound falling?

Sterling has started this week as it ended last week, dropping against the Euro and other currencies. This afternoon the GBP/EUR rate has dipped into the €1.13’s which is a fresh 3 month low. The graph below shows how the Pound/Euro rate has moved in the last 2 weeks, dropping 3% and adding around £8,000.00 to the cost of a €300k property overseas.

What’s causing the GBP/EUR rate to drop so quickly?

The main reason is, as I’m sure you will be aware, Brexit. Last week saw cross party talks collapse, and markets now await May’s latest attempt to get her deal voted through parliament in a few weeks. There is little expectation the deal will go through, having been voted down 3 times already. The Prime Minister said that the new vote will be a newer offer that has been improved, but any changes are likely to be cosmetic. We can expect Labour to vote against it, and as the parliamentary arithmatic hasn’t changed, the outcome is not likely to have done either.

So, with the deal expected to get defeated again, what next and how will it affect the Pound? If it is defeated, May’s time will be up, and now speculation is turning to who will replace her. The bookies have Boris Johnson as the favourite, and this is what is causing the Pound to fall. He is a well known supporter of Brexit, and if he were to become the next Prime Minister, it’s likely a harder exit without a deal becomes more likely. Markets are vey fearful of this due to the uncertainty and disruption it could cause, and the Pound is falling as a result.

The EU have also said that they will not re-negotiate their deal with any new leader, so the options are pretty much limited to a hard brexit, or a new referendum.

Worried about the Pound falling further?

The recent movements show how quickly exchange rates can change, and avoiding this is crucial when exposed to the currency markets e.g. when purchasing property overseas or paying international invoices. If you need the best Sterling exchange rates and are worried about the rate continuing to fall, get in touch today to discuss how we can help you avoid the rate moving against you and get a free quote.

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