Recovery expected for Sterling
Sterling is expecting to recover from its recent losses against a host of major currencies before year-end as the UK and the EU endeavour to strike a thin trade agreement.
“Pound Sterling (GBP) bore the brunt of the move as anxieties over a no-deal outcome triggered a steep sell-off in the UK currency. The British pound to euro (GBP/EUR) exchange rate closed in on a 4% low last week, while the British pound to US dollar (GBP/USD) exchange rate plunged by 3.62%,” says Halo Financial.
Pound Sterling to Australian dollar (GBP/AUD) slipped to year-and-a-half lows, with the British pound to New Zealand dollar (GBP/NZD) exchange rate slumping to a month-and-a-half worst.
While it is evident that pound-based exchange rates are on a knife-edge, there is still a strong possibility of a deal being reached at the last minute.
Although the European Union has made threats of a trade war and legal action if the UK doesn’t scrap the controversial Internal Market Bill, the official nature of the sanctions have not yet been elucidated.
There are also growing signs that several Conservatives are prepared to vote down the legislation, despite Prime Minister Boris Johnson’s unwillingness to surrender to the EU’s threats. According to the 2016-2019 Brexit playbook, when parliament works against the Prime Minister to soften the outcome, GBP tends to benefit,” comments Halo Financial.