With the UK set to complete the EU departure tranisiton period October 31, a lack of a clear deal from UK and EU leaders has some experts concerned that the nation could be racing towards a “no-deal Brexit”. With traders now wagering on these concerns, the pound plummeted to its greatest loss against the euro since June.
Moving forward, it is likely Brexit will continue to be the leading influence on the pound, with the fallout of the coronavirus pandemic also lending a hand.
The pound is currently trading at a rate of 1.1121 against the euro according to Bloomberg at the time of writing.
Speaking exclusively to Express.co.uk Michael Brown, currency expert at Caxton FX shared his insights into the exchange rate.
He said: “Sterling lost ground against the common currency yesterday, notching its biggest one-day decline since June, as traders once again became jittery about the prospect of a cliff-edge conclusion to the post-Brexit transition period amid an escalation in ‘no-deal’ rhetoric from Number 10.
“Today, with the latest round of formal UK-EU trade talks set to get underway amid scant expectations of a breakthrough, the pound is likely to continue facing stiff headwinds.”
However, though the pound has already faced dramatic losses, it seems more could be in store if the Government are not able to secure any stability for the UK’s future.
George Vessey, UK currency strategist at Western Union Business Solutions explained: “Another round of UK-EU trade negotiations begins this week, though there is little optimism for a breakthrough.
“The underlying mood remains negative, exacerbated by the press releases over the weekend, which has caused the pound to depreciate against all its major currency peers today.
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“In a fragile global economic outlook, international trade relations are paramount, though the UK government plans to undermine key parts of the Brexit withdrawal agreement, risking the collapse of negotiations with the EU.
“The Financial Times has reported that the UK is planning new legislation to be published on Wednesday that will say the government reserves the right to set its own regime in areas such as state aid and Northern Ireland customs. “This threatens to upend trade talks and lead to a no-trade deal scenario, an outcome that UK PM Boris Johnson believes will still be good for the UK economy.”
Though the transition period is not set to end until December 31, both UK and EU leaders agree that a trade deal needs to be agreed before the EU summit on October 15 to allow time for ratification.
“If the no-deal rhetoric ramps up, then history would suggest the pound will fall sharply,” warned Mr Vessey.
“GBP/USD could slip back into the lower realms of the $1.20s and GBP/EUR under €1.10.
“Brexit will dominate sterling’s trading bias this week, but general COVID developments and UK GDP data on Friday may also play a part in GBP price action.”
With these changes in mind, it is vital holidaymakers with impending plans keep an eye on any political developments that may impact the exchange rate.
Planning in advance is the key way to secure the best rates according to Marianne Gilmore, managing director of private international payments at currency provider Moneycorp.
“Consider your desired currency’s previous rate fluctuations in the last month,” she said.
“From these values, budget a realistic window as to what rate you’d be willing to exchange on, bearing in mind that an additional commission fee may apply when you actually exchange your money.”
Shopping around can also help enhance the rates on offer.
The Post Office Travel Money is currently offering a rate of €1.0758 for amounts of £400 or more and €1.0970 for amounts of £1,000 or more.
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