Bobby Ward gives his prediction on the strength of the pound after Brexit and suggests how to manage your international payments in the run-up to the UK leaving Europe.
We are all interested to know what will happen to the pound after Brexit: when we eventually leave Europe, that is! If you are like me, keeping track of the nuances of the overall Brexit deal is becoming hard work and there are so many different views in the market it can be tricky to know which voices to listen to in these uncertain times. It is fair to say that Brexit has turned predicting the pound into a difficult business for us all as the uncertainty over the UK’s departure from the EU means a single forecast is not possible.
However, I do believe that the pound will strengthen once a Brexit deal has been secured. Uncertainty clearly weakens the pound (as it would any other currency in any other market) as we witnessed in the Parliamentary rejection of Theresa May’s deal in December 2018. Currency markets like certainty. When certainty is achieved in the Brexit process, there is a strong chance the UK’s economy will look healthier and wealthier.
Managing foreign exchange in the run-up to Brexit
Movements in exchange rates have been significant which isn’t surprising considering the uncertainty. The euro/sterling exchange rate the day before the Brexit referendum stood at €1.31. The day after, when the result was clear, it stood at €1.20 and so began the rollercoaster ride of the pound over recent months.
This creates a real headache for businesses and individuals affected by the volatile exchange rates. Whether you are an individual who may be supporting someone overseas or whether you are a business paying salaries abroad or in the import/export business these changing times can be tricky to navigate.
There are products and services that can help to reduce the risk involved in international payments while we wait for a final Brexit strategy:
It is important to work with an FX specialist, like Vorto, to put an effective foreign exchange strategy in place for your business. One strategy does not suit every business so we pride ourselves on understanding your business requirements and FX objectives. You will work with a designated trader who can advise on your options during the exit process from the EU, and also work with you to decide on the best approach for your individual or business needs once a final Brexit strategy is hammered out.
In the short term, you are able to hedge against currency movements by putting a forward contract in place. This can be particularly useful for importers and exporters and it can be cost effective, easy to set up and if you already know your advance business or personal currency transfer needs this is an option for you.
Whatever your strategy, it should be constantly monitored by a designated trader given to you by your foreign exchange specialist. At Vorto, we choose to build relationships that are beneficial to all and aim to work with our clients on an ongoing basis. It is important to us that we do a great job and meet your expectations in the short and long term.
There are of course other outside influences that can affect GBP, inflation being the most prominent factor amongst others. We, like you, are looking forward to some concrete answers to the Brexit question!