Brexit: Expert on why fisheries is 'blocking progress' in talks
The pound has “firmed” against the euro as all eyes remain on Brexit negotiations and the promise of “definitive news” of a deal or no-deal scenario before the end of the transition period is up. Experts remain hopeful a deal would result in a boost for the pound.
However, the Bank of England is forecasting “challenges” should a no-deal scenario arise.
The pound is currently trading at a rate of 1.1065 against the euro at the time of writing.
Michael Brown, currency expert at Caxton FX spoke exclusively with Express.co.uk to share his insight.
He explained: “Sterling firmed a little more against the euro yesterday, but was unable to sustain any breaks of the 1.11 mark as the market continues to wait for some definitive news on Brexit.
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“That shall once more be the theme today, and possibly over the entire festive period as negotiations come to a conclusion.”
However, George Vessey, UK Currency Strategist at Western Union Business Solutions has suggested a deal may even be struck in the coming days.
“A post-Brexit trade deal may be secured in the next few days, which is lifting the British Pound higher,” he told Express.co.uk.
“The gap between the UK and EU over the familiar fisheries sticking point, is said to remain substantial though. Nevertheless, GBP/USD is marching towards $1.36, though GBP/EUR remains near €1.11.
“With just two weeks to go until the end of the Brexit transition period, both the UK and EU appear to be more optimistic that a trade deal will be secured in time to avoid a disruptive no-deal scenario, that could send sterling tumbling 10 percent.
“Betting markets are pricing in an 80 percent probability of a deal and currency speculators have reduced their bearish GBP positions.
“Sterling’s short-tern value remains acutely dependent on how the trade talks play out, with volatility expectations soaring over recent weeks.
“The upside potential of GBP/EUR appears limited even in the event of a Brexit deal due to the positive impact this scenario would also have on the common currency and given the fact that EUR/USD is trading at new two and a half year peaks.”
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The Bank of England (BOE) is also due to announce its latest financial forecast this evening.
“The Bank of England (BOE) is expected to keep monetary policy unchanged at midday today, particularly since a Brexit deal still hangs in the balance,” Mr Vessey continued.
“A no-deal outcome is forecast to exacerbate the challenges faced by the coronavirus-damaged UK economy, which would likely see the BOE intervene with more stimulus measures.
“The BOE is expected to keep interest rates at a historic low of 0.1 percent but the main focus will be on forward guidance about how the bank might react to differing Brexit scenarios.
“Even with a trade deal, the central bank has previously warned of the negative impact on the UK economy and that companies will struggle with the additional non-tariff barriers that will come into force.
“Additional bond buying is probably going to be used by the BOE to support the economy, although negative interest rates have also been hinted at.
“Taking rates below zero would likely send the pound lower, but for now markets have priced out such a policy move.”
Whether Britons are looking to purchase holiday money for upcoming overseas travel or have leftover currency they want to switch back into pounds, the current situation might be a confusing one to navigate.
However, Money Saving Expert Martin Lewis has warned there is no clear answer on whether or not the pound will increase or decrease in value until a deal or no-deal has been confirmed.
He commented: “If you’re trying to play the markets, the markets factor in what they know so that price is already in.
“It’s likely if we have a no-deal Brexit, the markets don’t like that and the pound will get weaker.
“That will be good for you if cashing your euros in so you’d want to wait.
“If we have a deal, the pound will get stronger which will be bad for you.
“I don’t know which one of those is going to happen.”
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