FOREX NEWS: Pound in trouble after Brexit, outlook gloomy

spanish property foreign exchange pound euro
Euro to the pound

After a brief rally mid-week, Sterling ended the week back on the skids in a post-Brexit rout. A currency exchange specialist from TorFX explains.

A week on from the EU Referendum result the market has taken its time to digest the news of Brexit and had started to work hard and regain some of the ground that we lost so dramatically last week. That was until Bank of England Governor Mark Carney opened his mouth yesterday.

Mr Carney stated that the deteriorating outlook meant that action from the Bank was likely this Summer. This is expected to be in the form of additional quantitative easing and perhaps an interest rate cut down from the 0.5% that we’ve endured since 2009. The pound will suffer by these measures and was kicked whilst already down and nearly out late on Thursday.

This last week has seen huge swings on the world’s financial markets as traders and investors struggled to assess the impact of the Brexodus that we voted for last week. The pound against the dollar slumped by 20 cents from the high of overnight Thursday and this week has reached a fresh 31-year low. Against the euro, the pound has tumbled a little over 9% in the week, but 18% down from the highs of late 2015. We reached €1.1896 at the lowest point.

Many Brexiteers will suggest that once the political uncertainty is rectified and we start to sign up all of these free trade agreements that Boris and the rest were touting, then our economy will come back stronger and better. I doubt this will be a quick fix however, and those of you wanting to buy into the Euro over the coming months are urged to act soon.

A recession worse than we’ve seen in the last decade is likely, and coupled with muted economic growth, more quantitative easing, and further interest rate cuts, it’s a damaging cocktail that the pound is in the middle of, and will struggle to recover from we think.

We’ve seen parity on this market in the last decade and there’s a good chance that we may head there again sooner rather than later, so expect the worst but hope for the best and please get in contact to protect yourself in this uncertain market.

This article is written by a foreign-currency broker working for TorFX, a forex broker established in 2004 to provide foreign exchange and international payments to both individuals and companies. TorFX is authorised by the Financial Conduct Authority under the Payment Service Regulations 2009 for the provision of payment services. Their FCA number is 517320. To verify their authorisation, you can visit the Financial Services Register and search the register using their FCA number. SPI is not responsible for the opinions of guest contributors.

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