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Will the pound now fall lower?

Tuesday, October 11, 2016 20:57
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Will the pound now fall lower is a big concern on financial markets and the most likely answer is that yes it will more than likely fall lower. Pretty much every major bank out there is now predicting a rate on GBPEUR between 1.08 and 0.95 in the coming months. Whilst GBPUSD predictions range from sub 1.20 to parity. Having witnessed the falls of the last two weeks it is quite difficult to rule out anything and even last night we saw further moves lower on sterling rates following a fairly flat Monday and Tuesday. So how can buyers and sellers of the pound manage such crazy times? Thankfully there are some options to help manage your exposure to such volatility.

Sterling has fallen against all currencies as the Brexit worries start to deepen. The options have gently been narrowed as to the UK’s position outside of the EU and as we get further clarity the rates are reacting. We now know that the UK will seek to invoke Article 50 by March 2017 which means there is a 2 year period within which to strike a new deal with the EU. By setting the UK on a path to a more ‘hard’ Brexit financial markets are concerned over the shape of the negotiations ahead and what it will mean for the UK economy. Access to the Single Market will allegedly cost the UK economy £66bn per year and slash 10% off GDP (Gross Domestic Product). These are the Treasury forecasts which were so vociferously knocked down as reflecting ‘Project Fear’. Will they materialise?

Current economic data suggests that the UK economy is doing rather well which is making digesting everything happening rather difficult. Last week excellent news in the Manufacturing sector and signs the UK economy grew 0.4% in the 3rd Quarter did little to halt the pace of sterling’s decline. It does seem the pound is destined to fall further and remain volatile as we have a number of important milestones to overcome including the latest Bank of England Interest Rate decision, US and Eurozone Interest Rate decisions and the Chancellors Autumn Statement.

With politics and statements from politicians both in the UK and EU helping form some of the latest trends on sterling exchange rates it is important to be aware of the latest news and up to date with fresh developments. Utilising tools to help manage your transfer rate can be very effective too. For example a Stop / Loss order guarantees you won’t get a ‘worse than’ rate if markets drop. A ‘Limit’ order helps to target a higher level if rates rise. You the client choose your desired ‘best’ or ‘worst’ rate and we monitor the levels automatically. These deals guarantee your currency purchase at the desired rate even if only hit for a second.

Will the pound now fall lower is a very valid questions as sterling rates seem bound to err on the volatile side and with the levels entering potentially dangerous lows for UK firms buying goods and services from overseas as well as overseas property investors, now is the time to be making plans. On the flipside those businesses and individuals getting paid in a foreign currency or those selling an overseas property would do well to manage their positions too. Understanding everything ahead driving the rate and making some plans is the only way to help in such uncertain times, I can help you formulate a plan suggesting target rates and events to help narrow down your purchase window.

For specialist information and guidance on market developments please speak to the author by emailing or calling 01494 787 478 in UK business hours and asking to speak to Jonathan Watson. Alternatively please fill in the form below and Jonathan will contact you as soon as possible.



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