We’ve received a number of queries since the EU Referendum as to when the best time to buy Euros could be? Will Sterling recover its losses in the near future?
As it stands, GBPEUR exchange rates are floating around the 1.20 mark, to put this into perspective, the ten-year average is 1.25. The lowest recorded rates were in December 2008 which saw the pair fall to 1.02. Rates are still relatively attractive at this stage.
However, rates have the potential to fall further in the foreseeable with a number of key questions requiring answers.
Could Sterling weaken further?
The concern now is that Sterling will be vulnerable to further weaker due in part to the turmoil within the British parliament. The vote to leave the EU was not welcomed by the Scottish and Northern Irish residents who have already begun their campaign to remain within the EU. This could lead to a breakup of the UK leading to implications for GDP and growth.
Then of course, there is the news of David Cameron’s resignation, who will be his successor? Elections have always been known to cause volatility in the market, this could prove more damaging to the Pound which is already under enormous pressure.
When will the triggering of article 50 occur? With a new Prime Minister not due until September, this extended period of uncertainty will not help the Pound.
And then, we have concerns regarding the economy, Moody’s have already hinted at downgrading UK banks to negative. With the majority of economists, the BoE and financial institutes all in agreement that a Brexit would have negative implications.
It does look plausible that Sterling may be open to further weakness in the short/midterm and I predict that GBPEUR rates could fall further to the mid-teens, 1.13-1.15.
If you are exchanging Sterling for a foreign currency, it may be worthwhile doing so sooner rather than later. The UK’s withdrawal from the EU will likely be months of negotiations with no defined outcome.