Sterling is at some exceptionally low levels and is likely to weaken further in the coming days and weeks but until we get concrete news on the new Tory leader and the process of leaving the EU is physically triggered the rates might not have any days similar to last Friday. It is the best time in two years to sell euros for pounds and the best time in 30 years to sell dollars for pounds.
Whilst the pound is sure to remain on the back foot as ripples spread through financial markets, the immediate news is that well there isn’t a great deal to say. The key point of the UK’s withdrawal is the triggering of Article 50 of the Lisbon Treaty which sets out a two year window within which the UK would leave the EU. By resigning David Cameron has sidestepped invoking this Article and it is now down to probably the next Tory leader. With the leadership contest not due until October there is now a window within which we will not know exactly when Article 50 will be invoked. If you have a currency transfer to consider the pound is bound to struggle but until Article 50 is triggered the physical process of leaving the EU is not going to happen. EU leaders are already lining up to encourage this all to happen very quickly but it is highly unlikely this will happen before October. And even then once a new Tory leader is voted in, it might be that they then decide to call a General Election.
What kind of deal will the UK get?
The UK’s deal has to target two key points. One the issue of immigration and two access to the free market. Other countries outside the EU which have deals allowing access to the Single Market require them to accept the free movement of people principles which the UK is unlikely to agree to since this was a central point of the Leave campaign.
In short nothing is going to happen quickly but there is likely to be plenty of uncertainty as investors scramble to make sense of what is around the corner. The Bank of England might seek to cut interest rates or look at more QE to help boost the economy, this is all much further down the line but investors always look to the future.
If you have a transfer to consider keeping up to date with the market is key to make an informed decision. Please email me Jonathan on [email protected] to learn more about what the future holds and how to maximise your transfer.