The pound could be in for some severely testing times as the latest Parliamentary vote on Brexit approaches next week. Whilst last night the Government was defeated on a Finance Bill which should help prevent a no-deal Brexit, the pound could still be in for some volatile sessions ahead.
No-deal Brexit deemed too disruptive to UK economy
The British Government is planning for a no-deal Brexit but many in Parliament have said they will do everything in their power to stop a no-deal, for fear it will be too disruptive for the UK economy.
There is an expectation the deal will not get through in the vote on Tuesday. This could see sterling much lower as the market is forced to decide on what the likely outcomes are in the future. These include a General Election and also a second EU Referendum.
Assuming the vote does not get passed, it is difficult to see how the pound will not have a good day. In December, the postponing of the vote saw the pound losing ground as investors lost faith in the UK and the currency. The only way I can see sterling having a good day, is if the Bill is passed which seems highly unlikely.
Increased political uncertainty is negative for the Euro
The Euro is under pressure too and if it wasn’t for sterling being in such a quagmire, the pound would probably be doing much better against the single currency. Expectations for the Euro are still rather mixed, increased political uncertainty in the Eurozone may see the currency softer as investors await further news on economic news.
Yesterday, the German economy was in the spotlight highlighting the fears of either a German recession, or worse a Eurozone recession. German Manufacturing activity showed a decline which could be something of concern for the future. However, despite concerns in the Eurozone, the Euro continues to defy expectations and find buoyancy against the pound.
I expect the pound could be in for a few excessively volatile trading sessions in the coming weeks. Clients with a position to buy or sell the pound against the Euro might wish to take stock of the major movements we might expect.
Thank you for reading and I look forward to welcoming any questions or comments. If you would like to discuss anything in my GBP/EUR forecast please use the form below to send me a message: