Sterling Falters as Brexit Negotiations Sour (Matthew Vassallo)

Sterling has come under pressure once again during Monday’s trading, with reports surfacing that Brexit negotiations have already hit a wall already.

The UK have said they are willing to step away from negotiations, which backs up the Prime Minsters tag line that “no deal is better than a bad deal”.

The Pound has seen its value tumble in recent days, with GBP/EUR now trading under 1.16. Although it has held its position around 1.30 against the USD, this is more to do with the negative Trump effect in my opinion, as it is down against most of the other major’s.

Commodity currencies such as the AUD & NZD have thrived, gaining over a cent during the day’s trading and the question now is whether the Pound will find enough confidence over the coming days to recover these losses.

I have continually advocated that clients look for short-term opportunities in the current market and the recent downturn is testament to this.

No one can predict exactly how a currency pair will evolve but with so much uncertainty surrounding the UK, in regards to what deal we will negotiate in our exit from the EU and upcoming general election, now is not the time to be gambling on a consistent upward trend for Sterling.

The reasons attributed to today’s fall are twofold. The weekends polls showed that Labour have gained against the Conservatives and with a Torrie landslide likely priced into Sterling’s current value, this has shaken the market somewhat. Regardless of the likely outcome, any deviation from the expected market result will generally have a negative effect. This means those clients holding the Pound could be susceptible to further losses, should the expected result start to waver and if lessons are to be headed form last year’s key votes, the expected result should never be taken for granted.

This negative feeling was compounded today as reports regarding a Brexit bill that could end up costing the UK up to $112 billion. Whilst this is likely to be an inflated figure, it is clear that the EU expect us to pay a huge compensation bill during our Brexit separation.

This immediately forced UK negotiators onto the back foot and report this afternoon indicated the UK were willing to step away from any deal.

Whilst this outcome is highly unlikely to the fact it would be of detriment to both us and the EU, it is clear that negotiations are going to be long and arduous. If we are falling at the first hurdle, where do we expect to be two years down the line when things get really tough?

These issues lead me to the conclusion that Sterling’s value is likely to remain unstable for months if not years to come and any further spikes should be snapped up by investors and clients alike. There is no telling how much further the Pound could fall and whilst I thought we had found some sort of foothold in the market, today’s developments are a stark reminder how fragile the UK economy remains in the eyes of investors.

If you have an upcoming Sterling currency transfer to make and would like to be kept up to date with all the latest market movements, or simply wish to compare our award-winning exchange rates with your current provider, then please feel free to contact me on 0044 1494 787 478 and ask one of the team for Matt.

Alternatively, I can be emailed directly on [email protected].