Post Brexit foreign exchange trends

Following the triggering of Article 50 last week, our trusted foreign exchange specialist partner, Argentex, rounds up the post Brexit foreign exchange trends:

“Last week we saw the UK government officially trigger Article 50 of the Lisbon Treaty, and by doing so making the first official step towards withdrawal from the European Union (EU). The pound’s decline since the Brexit referendum last June has been widely publicised, and there were suggestions the triggering of Article 50 may cause a similar upset within the post Brexit foreign exchange markets.

Many investors believed triggering Article 50 may cause another run on the pound and another significant crash. However, other investors believed the exact opposite and the process removed a degree of uncertainty, and therefore the pound may start to climb.

In reality, the movement from the pound was fairly minimal. The general sentiment as Theresa May addressed the UK parliament was very conciliatory and respectful, leading the markets to believe the exit from the EU may not be as bumpy as first thought.

So, what’s next for the pound? As negotiations progress and uncertainty surrounding the future for the United Kingdom is removed, it makes sense that the pound will gradually regain its strength. If negotiations go well, investors will buy back into a ‘cheap’ pound and rates will push higher. However, negotiations are a two-way process, and, as such, if / when negotiations turn sour, investors are likely to quickly sell the pound and rates could come crashing back down. This leaves us at a cross road with the rates: up or down?

At times like this it makes sense to see what the major banks are forecasting. Unfortunately, this provides us with more questions than answers. Barclays suggests by the end of the year GBP/EUR may be at 1.3200, whilst HSBC suggests parity (GBP/EUR: 1.0000). The story is the same when it comes to the US Dollar: RBS predict rates will be at 1.35 by year end, and HSBC believe GBP/USD rates may be nearer 1.10.

In uncertain times such as these it is important to ensure that you are not exposed and at risk to the fluctuating exchange rates. Enness have an exclusive partnership with Argentex who are able to completely protect you against exchange rate movements allowing you to accurately budget for any international investment. Whilst doing so, Argentex offers significantly better rates than the banks and other small retail FX brokers and provides a tailored advisory and execution service to its international client base.”