Brexit uncertainty has been casting a shadow over the pound for some time due to the uncertainty of the outcome. Now that the Brexit process has been put on hold due to the announcement of general election on 12th December, there is an added layer of uncertainty which could cause further volatility.
The pound has been gathering strength in October, rising after Boris Johnson managed to find an alternative to the Irish backstop which was acceptable to the EU. Sterling made gains against the euro and the US dollar as hopes of a Brexit deal gathered momentum. Those hopes were dashed by Parliament’s rejection of the three-day timetable for debating the proposed deal but the pound didn’t give back all its gains, in part because the EU granted a further extension to the Brexit deadline and fears of no-deal continued to recede.
The announcement of a General Election may be a means of breaking the parliamentary deadlock which is prolonging the Brexit process, but it adds a new layer of uncertainty in the political picture. Currencies are often volatile in the run-up to a General Election because of the uncertainty of the outcome. In recent years, there have been some significant political shocks and the nature of this election and the ongoing Brexit question make the outcome difficult to predict, and this may make the market respond to every report, opinion poll and rumour surrounding the final result.
Once Parliament is dissolved on 6th November and the campaigns begin in earnest, Brexit will be placed on pause but it’s unlikely to be forgotten. It’s an issue that’s likely to loom large in the various parties’ campaigns, although it’s possible this will be balanced by a raft of domestic issues for an electorate weary of the issue. With so much happening in the political arena and so much resting on the outcome, from the outcome of Brexit to the future direction of the economy, it’s likely that statistics on business performance may fade into the background unless the results are particularly significant. The Bank of England has repeatedly suggested it will not take any drastic action regarding interest rates or other measures until the outcome of Brexit is clear. The General Election adds another factor for consideration and may mean that the Bank of England continue to hold off until a clearer picture emerges.
The political uncertainty of both Brexit and the upcoming General Election mean that the pound is likely to be volatile and the currency market particularly difficult to predict. If you have international payments to make, you may find it challenging to decide when the best time to exchange funds. We’ve teamed up with Savings Champion to provide access to a wealth of specialist currency services that help people make the most of their money overseas and mitigate currency risk. As well as tools to track, target and even fix an exchange rate, moneycorp clients can access great rates, make payments with low transfer fees and manage their international payments over the phone from a UK call centre with award-winning customer service as well as online and via a mobile app. You can’t control fluctuations in the currency market or predict the conclusion to the current political drama, but a currency specialist like moneycorp can help you make the most of your money.
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