Pound falls as parliament returns

Pound falls as parliament returns – Following gains for the Pound yesterday, today the mood towards Sterling has soured, with the British currency sliding throughout the day. We have lost 1 cent to the Euro, which has dropped from €1.1350 to €1.1260. Against the US Dollar, the Pound is also down a cent, currently trading at $1.2365. View live currency graphs here.

Pound/Euro

Why has the Pound fallen today?

Ultimately the drop is down to recent political events. Parliament resumed today, however nothing has really changed. There have been calls for the PM to quit, along with the Attorney General Geoffrey Cox. Cox gave a robust performance in answering questions from MPs today, and it will be the PM’s turn later today.

Recent political manoeuvrings have removed the chances of No Deal happening next month. Yesterday’s court ruling initially gave the Pound some support, but exchange rates are now dropping back away. This is because it’s now less likely that a Brexit deal will be agreed. There had seemed to be some momentum behind the negotiations, but that now seems to have waned. It’s quite clear that recent events have tied Boris Johnsons hands, and the EU know it.

Leaving with a Deal now less likely

Even though ‘No Deal’ is now less likely, MP’s actions have, in my view, contributed to making any deal less likely. Recent defeats for Johnson mean the EU know that the UK won’t leave without a deal. They also know that the PM is now severely restricted and will have to ask for an extension. Given the inability of parliament to agree on anything, they also know that even if a deal is struck, there is no consensus among MPs that would need to vote the deal through.

Recent events therefore are mostly political, and in terms of Brexit, have probably reduced the chances of a deal being struck next month. This is why Sterling has fallen in value today. Many MPs may state that their intention was to avoid ‘No Deal’, however it could be argued that their actions have reduced the chances of a possible breakthrough in the negotiations.

Pound likely to remain under pressure

If a deal was agreed, it would almost certainly have sent Sterling higher. An extension would simply extend the uncertainty, limiting any gains for the Pound. While uncertainty remains, so will pressure on the Pound.

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