A noticeable trend we’ve seen on the GBP/EUR pair since the UK public’s Brexit vote is that whenever there is talk of a ‘Hard Brexit’, the Pound has subsequently weakened, as this is due to the fact that many within the financial world had hoped for a long drawn out period of negotiations between the UK and the existing members of the EU, but those hopes are now fading quickly.
This so called ‘Hard Brexit’ was in the headlines once again yesterday evening, as the European Council President Donald Tusk said that the only alternative to a ‘Hard Brexit’ would be no Brexit, and the Pound weakened off the back of this announcement as has usually been the case. Many may recall the way in which the Pound dropped quite dramatically when Boris Johnson suggested that the beginning of the UK’s separation from the EU would be initiated in the early months of next year.
Donald Tusk – President of the EU Council warned the UK that the EU will ‘not compromise on its insistence that freedom of movement will be a condition for Britain’s access to the single market’.
The reason I’ve covered these details is because personally, I think that as talks between the UK and EU heat up, it’s likely to weigh on the pounds value as we approach the invocation of Article 50 next year towards the end of March. This is a key date for both the UK and the Pounds value as when Article 50 is invoked, the UK will have 2 years to separate from the EU.
A growing number of major financial institutions and economists such as Unicredit and HSBC are forecasting 1 for 1 on GBP/EUR in the upcoming months, and HSBC suggested that the pair will be trading at this level towards the end of 2017.