Sterling exchange rates have been extremely fragile over the last 2 weeks with a vote upcoming for The PM’s latest Brexit deal- the reason why the Pound has been so weak is due to the fact that many MP’s have stated that they will be voting against this deal, and the only alternative is a no deal scenario.
Many forecasts including one from the BoE have also emerged over the last week showing that the UK economy would be in a very bad place if the UK did walk away from the EU without a deal- which is now putting the Pound in an extremely volatile position. If the deal gets voted through- then the Pound will strengthen as certainty will come to the market (At least for the short term), however- if the deal gets voted down- then we are expecting at least a 3% drop in exchange rates- potentially more if a no deal scenario is realistic, strictly due to uncertainty in the market.
The GBPEUR is extremely undervalued currently, especially with the current problems in Europe (Italy)- however it seems from an investor standpoint- the UK is still not worth going near until there is some resolution with Brexit and some real confirmed direction.
Moving into December, the Fed is also expected to hike interest rates, which should add some more strength into the Dollar- with this it seems likely that the GBPUSD could fall further from the current 1.27 level, potentially down to 1.25 if no strength is found for the Pound.
At time’s like this, it’s natural to want to try and “beat” the market and gamble on the vote- however, if you do have a substantial transaction going through in the near future- it may be worth exploring options such as market orders to manage your risk- there is no extra cost for it, it just helps you mitigate your exposure to the market- if you would like further information about this please don’t hesitate to contact me.