The UK officially now has a new PM, and once Boris Johnson took the reigns, we initially saw Sterling gain around 1% across the board- these gains were short-lived as Boris followed up with setting up a “War Cabinet” to prepare for a no-deal Brexit. We have now seen Sterling fall another 2% over the last week due to this, and the BoE stating that there is a 1 in 3 chance that the UK will hit a recession if things go the way the PM is saying.
We are now seeing a no-deal Brexit getting priced into exchange rates with latest prices being;
GBPEUR-1.0920
GBPUSD-1.2150
To put the above in context, we saw GBPUSD falls to 1.20 last week and GBPEUR fall into the 1.08 area after the Fed interest rate cut- the reason the Dollar ended up strengthening is that Fed Chair Powell has stated that there may not be any need for any further cuts and this cut was strictly to balance the economy.
We have seen the markets fall since Easter- to be exact, the rates have dropped significantly since March 15th. To put this into context on the purchase of $500,000.00 there is now a difference of an extra £32,257.58 compared to buying in March.
Similarly, on the purchase of €500,000.00, the difference in Sterling cost would be an extra £29,039.53.
The UK Government is currently in Summer Recess until September, which doesn’t leave a lot of time for the UK and EU to come up with a new deal by the October deadline- though in my eyes it is still unrealistic that the UK would leave without a deal in October, due to the amendments made in the House of Commons last month- investors are still not confident in the Pound and will continue to sell off until there is a resolution.
If you have a currency conversion to make before October 31st and are concerned about how the above has affected your bottom line, please don’t hesitate to contact me to discuss options to mitigate your exposure to the market.