Politics can be hugely influential for markets because of the uncertainty they create. For instance, a general election might see a nation’s currency fall, because of uncertainties over what impact a new government might have.
The Pound dropped by 20% after the Brexit referendum because not only was the outcome a surprise, it also saw the UK on a road to an unknown economic future. Lots of economists had expected the UK to suffer a recession shortly after the vote, but UK growth remained relatively resilient in the aftermath, even if the Sterling exchange rate didn’t.
Theresa May delayed the meaningful vote, but made three commitments. The meaningful vote will now take place on the 12thMarch. If no deal is in place by then, the 13th March will see MPs vote on whether the UK should leave the EU without a deal. If a no-deal Brexit is rejected, the 14th March will see MPs vote on whether Article 50 should be extended.
In recent weeks, Sterling has hit near two-year highs against the Euro, seven-month highs against the US Dollar, 10-month highs against the Canadian Dollar, and 32-month highs against the Australian Dollar, all on Brexit optimism. However, in the past week, the British currency has been volatile as uncertainty ramps up ahead of next week’s votes.
Whatever happens with UK politics, it’s expected Sterling will be volatile in coming months. If a deal is secured and markets anticipate a soft transition, the Pound could be able to climb against other currency majors. Meanwhile, if a no-deal Brexit appears a possibility, Sterling could drop rapidly. The Pound may not have recovered to pre-Brexit referendum levels, but if it appears the situation is under control and the economy begins to rebound, there’s potential for the British Pound to climb.
Speaking to a foreign exchange expert like Global Reach gives you the opportunity to discuss your currency requirements with an industry specialist. You’ll be offered guidance and market insight in times of volatility and have access to one of the most experienced Dealing teams in the industry. You can discuss locking in an exchange rate for up to two years, sign up for the latest currency news and rate alerts, or move money online with the Global Reach award-winning platform. Global Reach is also a winner of Feefo’s Gold Trusted Service Award and won the 2018 Best Currency Service Provider at the Shares Awards.
If you’d like to discuss moving your money abroad during this week's voting, contact us on +44 (0)20 7989 0000 to speak to one of our Dealers and find out more about making the most of your funds.