The pound to dollar exchange rate is set for a particuarly volatile week this week with the main market movements expected to come from political news and developments, mainly surrounding Brexit and the posiiton of Prime Minister Theresa May.
With the original Brexit deadline supposed to have been this Friday we really do find ourselves in a difficult position, and I believe that there are a number of ways that this week could pan out for the U.K, Theresa May and of course the pound.
Cabinet Ministers are meeting this morning for an advanced briefing on the week ahead. Over the weekend hundreds of thousands marched in favour of Brexit being revoked. On top of this a ‘revoke article 50’ Government petition has hit a record 5 million signatures, at points crashing the Parliament website.
There are a number of ways the week could end, it does appear that there are several members of the Conservative party now calling for Prime Minister Theresa May to resign, personally I would not be surprised to see this happen. You have to admire the backbone of Prime Minister May but it does now seem that she has taken this journey as far as she can and that getting a result, whatever that ends up being will be reliant on a resignation from number 10.
Political uncertainty can generally lead to a currency weakening but in this instance there is also the chance that a resignation could actully strengthen the pound. It would open up the door for a new leader of the Conservative party and a number of different options could end up on the table for how the UK may progress.
Even if Theresa May does remain in her position it is likely that there are a number of options that the Brexit path could take this week. It is likely that rather than have a simple meaningful vote on the Prime Ministers deal for a third time there could be a series of votes on other options and paths to take, as well as the deal the prime Minister is having trouble getting through.
The options currently appear to be;
- Revoking Article 50 (Likely Sterling strength)
- Second referendum (likely Sterling strength)
- PM deal and an additional customs union (hard to call how the markets would take this, but certainty usually leads to strength)
- PM deal, customs union and single market access (I would expect Sterling strength)
- A Canada/Norway style agreement (again hard to call but certainty does usually help a currency)
- Leaving with no deal (likely to lead to Sterling weakness)
With this having never happened before you cannot look back over history and see what happened the last time we had this situation. Whilst these are my thoughts on the above scenarios and how they may impact sterling exchange rates we have to be realistic and understand that quite frankly anything could happen to the pound. There is no set in stone path that it will follow should any of these instances end up being the final resolution.
What this does mean is that if you are currently buying or selling a property of large item that will involve a currency exchange with the pound and dollar (or any currency pegged to the dollar) then this week may be key for you.
If you need the assistance of an experienced and proactive broker then you are welcome to conatact us here at Pound Sterling Forecast directly. Not only do we offer highly competetive exchange rates but we have a proactive and useful service around that too, rather than leaving you to watch the rates (which move every second) all thoughout the day.
If you would like my help I can be contacted using the form below. I look forward to hearing from you.