The Pound Plummets: What will Happen Next?
Why has the pound fallen in July?
New UK Prime Minister Boris Johnson has committed to Brexit being delivered by the end of October with, or without an EU deal. Does Mr Johnson have enough time and leverage to negotiate a deal or will it result in yet another extension? That is yet to be seen, however the UK government have so far not agreed to any deal proposed by the previous Prime Minister, so Boris certainly has a task on his hands. Further, the EU has repeatedly stated it will not further negotiate terms beyond the deal that was agreed to with Theresa May, while Johnson wants to remove Irish backstop terms entirely.
What comes next?
This week sees both the Federal Reserve and Bank of England announce their respective interest rate decisions. It is expected that the Federal Reserve will cut the interest rate by 25 basis points to 2.25%. Generally, a currency devalues when an interest rate is reduced, so the question will be whether the markets have already priced in the rate cut to the USD exchange rate, or if the pound will regain some of its value.
There is also the chance that Boris Johnson will call for a general election, should he not gain the required support from his party. If that is the case, it will be extremely difficult to predict which way the Pound moves, as it could result in a new Brexit direction altogether.
The currency markets are set to remain volatile whilst there is still so much global uncertainty. Each political comment or central banking decision is causing significant currency movements which can affect expatriates or organizations who have significant international currency exchange requirements.
For example, $10,000 in April 2018 would have bought you £6,975, yet at this July’s low, it would fetch you £8,190. If your transfer requirement is not immediate, forward contracts enable you to lock in today’s exchange rate for a period up to 3 years in advance, effectively minimizing the risk against market volatility.
Beach Financial Group is partnered with XE Money Transfer, a trusted global payments and foreign exchange specialist for businesses and consumers. Whenever you have a currency requirement, XE can typically save you up to 5% on the exchange rate and eliminate the fees on your international payment. Speak to Beach Financial Group today to open your free XE account ahead of your next overseas transfer.