Pound stuck at 4 month lows


The Pound has levelled off, but remains stuck at 4 month lows against both the Euro and US Dollar. Following the resignaion of Theresa May, and the European elections that saw the Brexit party win by some margin, markets are worried the UK could still leave with no deal in 5 months, and those fears are keeping Sterling subdued.

What does the EU Election result mean for Sterling?

Because the Brexit party won so much of the vote, only 6 weeks after forming, it’s meant that some leadership candidates are starting to indicate that they are prepared to leave with or without a deal in October. This is to try and stem the flow of voters away from the Conservative party to the Brexit party. The reason the Pound hasn’t fallen further, is that other parties that are campaigning to stop Brexit have also seen a surge higher in the polls.

What effect could Boris as PM have on the Pound?

It’s still looking likely that Boris will become PM, but I think some of his rhetoric will change when he does. While his comments appeal to Eurosceptic members of the Conservatives, most MP’s disagree that leaving without a deal is the best option. He will likely attempt to re-negotiate with the EU to get a better withdrawal deal. They have said they won’t do that, so the impasse remains, and with it, little hope of the Pound rising in the short to medium term.

Will the Pound rise or fall against the Euro?

There is every chance the Pound could fall further still if there is little sign of progress as we edge closer to the October cliff egde. Leaving without a deal is still the legal default, and a change of PM won’t change the issues that are stopping a deal. The EU have said the current deal is the only one on offer, parliament have rejected it multiple times, and despite the fact those like John Bercow are saying parliament will not allow a No Deal, it’s the only option left if MP’s do not agree some sort of deal. I don’t think parliament will revoke article 50, and any further delay to Brexit could trigger a general election that would cause even more uncertainty.

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