Luke Trevail, a currency exchange specialist at forex brokers TorFX, looks at the factors driving the pound’s exchange rate this week.
The pound has crashed this week. To a multiyear low across the board.
Sadly, the pound has traded as low as €1.0890 today after recovering from the abnormal overnight flash crash in Asia which pummelled the pound to as low as €1.05 before immediately rebounding. Aside from this freakish event, Sterling has had a kicking this week after Theresa May stated that the negotiations with the EU to arrange how Britain leaves the union will begin at the end of March 2017.
A so called ‘Hard’ Brexit that will see the UK cut all connection with the single market is what the currency market has become most anxious about, and the Tories have done little to appease these fears. Chancellor Hammond stated that “This will be a period of turbulence. I expect that we will feel turbulence. There will be ups and downs.” These have been mostly downs.
Looking ahead at what’s coming up in the next few weeks and months provides us with more reasons to be concerned. The Bank of England have hinted that they will slash rates to 0.1% in November and introduce further quantitative easing to stimulate the economy. Historically this has weakened the currency.
HSBC have stated that they see parity as a real possibility for the pairing by the end of the year. But on a volatile market when appetite for the pound is at an all time low, those of you with longer term requirements may need to steady yourselves for potentially lower rates that £1 = €1. This would represent an all time low, having dropped to €1.02 during the 2008 crash.
As we can see the pound is being hit from every angle, and if you need to secure a sum for property or other commitments over the coming weeks it does seem prudent to not hang around. It’s difficult to see any light at the end of the tunnel at least until the end of March when Article 50 is applied. Goodness only knows what will happen after that, so prepare for the worst and get in contact if you’d like to discuss anything.
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.