The pound is at the mercy of Brexit and, with the UK facing even more uncertainty following Theresa May’s defeat yesterday, there will be even more volatility for GBP, experts have warned. Sterling fell against the euro yesterday evening following the vote but has soared since, peaking higher than yesterday morning. The pound is currently trading at €1.128 against the euro, according to Bloomberg at the time of writing. “Theresa May has just experienced the largest defeat for a sitting government in history,” Ian Strafford-Taylor, CEO of currency expert FairFX said.
“As Labour leader Jeremy Corbyn tables a vote of no confidence in the government – which could well trigger a general election – the UK faces even more uncertainty, and consequently even more volatility for the pound.”
“As MPs went to vote on May’s proposed Brexit deal, the pound stood 14 per cent down against the Euro, and down 13 per cent against the US dollar compared to the day of the Brexit Referendum.
“The referendum results back in June 2016 marked the start of a rollercoaster journey for the pound, which is still yet to return to its pre-Brexit rates against the Euro.”
It is uncertainty around Britain’s future which has the greatest impact on the pound and will continue to react to Brexit developments.
“Whenever there is economic and political uncertainty this creates negativity and causes a drop in confidence in the market, meaning that the pound decreases in value accordingly,” said Strafford-Taylor.
“While nothing actually happened aside from the vote result in the 24 hours from the Brexit referendum back in 2016, it was the potential uncertainty of what this meant for the economy which led to the pound’s fall.”
“Analysts will be keeping a close eye on political and economic factors in the UK, along with confidence and sentiment. The market will be looking at the strength of any potential political allies for the UK and the implications this will have on the economy. All that is certain is that the pound will continue to react to news.”
Britons heading abroad on holiday are advised to keep an eye on the exchange rate.
It is also well worth choosing a country where the pound is likely to stretch further
“Currency must play a pivotal role in holiday planning, and savvy holidaymakers should be keeping a very close eye on currency and its reaction to the latest political events,’ explained Strafford-Taylor.
“By choosing a destination where the pound is strong, the amount of money you need to enjoy yourself while you’re abroad will decrease, allowing you to see more of the world, for much less.”
For instance, Turkey has dramatically increased in popularity with British holidaymakers thanks to the crash the Turkish lira in 2018.
The ongoing weakness of the Turkish lira means holidaymakers can expect their pounds to stretch almost 29 per cent further in Turkey than a year ago.
Countries where the pound will go further include Turkey, Argentina, Russia, Zambia, Sri Lanka, South Africa, Brazil, Chile, Iceland and Australia
Strafford-Taylor added: “Predicting exactly how the pound will react against the Euro and other currencies in the coming days is difficult to predict, however it is likely to react in one way or another, which could greatly impact people not only planning traditional eurozone holidays but also those looking further afield.”
According to the Post Office, for customers withdrawing over £400 today, they will get €1.08 for every £1. Those getting out over £1,000 will get €1.10 for £1.
Published at Wed, 16 Jan 2019 08:10:00 +0000