The doom and gloom that surrounds the referendum result of the last fortnight continues as the pound hits historic lows against a host of currencies. Could this trend continue? Simply put, yes. A currency exchange specialist from TorFX explains.
The Bank of England has suggested that a cut in interest rates is imminent, and the market is preparing for this on the way, perhaps, to €1.10 or lower.
Whilst the political and economic outlook remains bleak, the pound is being punished by the uncertainty surrounding the majority vote for Brexit, and where the country goes from here.
A weak pound is not necessarily a bad thing for all sectors of the UK economy. It benefits exporters like the car makers in the country. But as an island with limited resources to satisfy a growing population we import far more than we export, and this is the factor that will have longer term effects on the domestic front, and loom over the already battered pound for the foreseeable future.
We are hearing whispers of parity or lower against the euro, so anyone thinking that the pound will bounce back may need to taper in their expectations and cut any losses sooner rather than later to protect against the downside.
I wonder how many of those Brexiteers would now stand by their decision, which some now say isn’t a legally binding arrangement and may not need to be fulfilled. The Tory leadership race now means that either Teresa May or Andrea Leadsom will become the second female Prime Minister in British history. Teresa May was an advocate for Remain, and so far carries the majority as we await the final ballot for who will reside at number 10. If she wins, then the pound may feel comforted by her appointment and ability to be sympathetic towards how the exit from Europe pans out in the coming weeks and months.
I suspect that there will be another twist in this tale yet, but in the meantime the pound is paying the price of representing a rudderless ship.
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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