GBP/EUR forecast; Will the Pound keep falling?

GBP/EUR forecast; Will the Pound keep falling? – Sterling has dropped even further since yesterday. GBP/EUR rates briefly dipped into the €1.08’s before settling at around the €1.09 mark, which is a new 2 year low. GBP/USD rates fell to around $1.21 and have since settled at around the $1.2150 mark. This is the lowest the rate has been in 28 months. (Click here to see live interactive graphs)

GBP/EUR forecast; Will the Pound keep falling?

There’s every chance it could. The massive sell-off for Sterling started yesterday, when the Government ruled out any talks with the EU, until they had publicly agreed to scrap the backstop. The EU have said they will not re-negotiate. As things stand, the UK will leave in October without a deal. The currency markets have come to the realisation that there is little that can stop this happening. Unless anything changes, we could see the Pound fall further still.

Rates are at their lowest since Article 50 was triggered 2 years ago. This is probably the negotiating position the UK should have taken at that point, not when there are less than 100 days to go until we leave! Politicians both in the UK and EU are on holiday during August, and so we wait to see if the EU will agree to re-open negotiations. If they do, and agreed to make the necessary changes to facilitate a deal, the Pound will recover. If they call the UK’s bluff, then we leave with no deal, and the Pound crashes even further.

Until this week, markets had not really taken the chances of No Deal very seriously. Nor had the EU. Now, investors are scrambling to reduce their GBP exposure as a higher chance of No Deal is priced into the market.

Will the Pound go back up?

If the EU agree to enter negotiations, then yes. Also, talk of a General Election could actually help the Pound. Recent polls are showing that the Conservatives now have a healthy lead over the Labour Party. If Boris gambles on capitalising this, then he could command a majority in the House of Commons.

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