Well, I guess the title says it all, doesn’t it? I said last week that Brexit could add some volatility, and it looks like it went 10 steps further and grabbed the spotlight for the whole week resulting in a Sterling sell-off.

The reason for this sell-off? I am sure the majority of you are aware but the UK Government is suggesting it could go back on the initial withdrawal agreement which could cause some issues, and the words “No Deal” have been thrown around a little more over the last week which has spooked the markets.

As a person who has been rather optimistic about a deal being done, this has been pretty unwelcome news! But, negotiations are always like this, and if there is one thing I have learned about Brexit over the last few years, is not to bother making predictions. So this is where I will annoy you- Nobody really knows what will happen next, realistically we are at a 50/50 decision on what happens next with the exchange rates, and it comes down to if there is a deal or not,

WTO Terms (A No Deal) is sitting at a 30-40% probability at this stage, which would be horrendous for exchange rates, I think we would see GBPUSD back at 1.15 and GBPEUR just above 1.02. And if we do get a deal, then we see GBPUSD at 1.40 or above and GBPEUR back to the 1.20 level relatively quickly.

Either scenario above could sound good for you or your situation, but the reality is, we just don’t know what will happen. They say there is now a 1-month deadline to get a deal together, so things could get very interesting between now and the end of October, or they could just spill over into December again.

Unfortunately, if you are trading Sterling- this is all you need to watch at this point, and it will be annoying, the media will give non stop bad takes, banks will throw out meaningless forecasts, and we will just have to decipher it all- but at the end of the day, nothing will matter until a deal is done or not. The other issue is, a No Deal scenario could happen, but be changed within a couple of days as leaders could get round the table again to hammer out a deal.

But to give you an idea of the impact of Brexit this month- GBPUSD has fallen from 1.34 down to 1.27 this month, and GBPEUR has fallen from 1.12 down to 1.07. This makes a sizeable difference on any amount you are transferring.

So this week? That is our main focus; Brexit. At the same time, it seems Covid cases are rising again in the UK, restrictions seem to be returning as winter approaches, and right now it doesn’t look very positive.

As ever, if you have any questions please don’t hesitate to reach out.