When parliament voted their approval for the updated EU Withdrawal Agreement Bill with a majority of 30, the pound surged as the market considered the prospect of an end to Brexit uncertainty. However, the optimism was short-lived as the following vote dashed hopes of the PM’s proposed three-day timetable. MPs voted with a majority of 14 against the timeline and as hopes of a swift resolution to the Brexit uncertainty receded, sterling went into retreat.
What do the latest developments mean for the pound?
Sterling had been steadily making gains as PM Johnson negotiated an alternative to the controversial Irish backstop and put his plans to the EU. The deal was approved by the EU Council mid-October and the Prime Minister held firm to his promise to take the UK out of the EU by 31st October. Hopes that an end to the uncertainty that has put the pound under pressure for more than three years was in sight, and that a departure without a deal could be avoided. The latest developments have put that optimism in check and the pound, like the Withdrawal Bill, has been left in limbo.
How did the EU respond and what does that mean for Brexit and the pound?
The EU granted a three month extension and the pound touched a high of 1.16 against the euro as the threat of leaving without a deal on 31st October was withdrawn. The fact that the EU has granted a second extension and their patience with the UK suggests that they are trying to avoid a no-deal departure. As the threat of no-deal appears to diminish, the pound may be on slightly steadier ground, but the persistent uncertainty and further upheaval of a Parliament in deadlock and a possible General Election means that there is likely to be continued volatility as the market responds to further developments.
Will there be a General Election?
The delay until the end of January 2020 meant that Boris Johnson pushed for a General Election, but the first attempt failed to pass when many MPs abstained. Parliament has now approved a General Election on the 12th December 2019.
His aim in calling for a General Election was to regain a firm enough majority to push the bill through, but while every election always causes some volatility in the currency market due to uncertainty, this one may be particularly fraught. Parliament will be suspended for five weeks during the campaigning period, putting the negotiations on pause. It will be a de facto referendum on Brexit and there are a number of variables – including the actions of the MPs recently sacked from the Conservative Party.
Some may be moving on from politics, making way for new faces and more uncertainty, and others may fight as independents or choose to join another party more closely aligned with their Brexit views. If the Liberal Democrats continue to push for Article 50 to be revoked, there is an opportunity for them to make gains from the section of the electorate keen for the UK to remain in the EU, possibly at the expense of The Labour Party, which has yet to make a clear stance on Brexit. This could cause a radical shift in the makeup of parliament, or could pave the way for a larger Conservative Party majority or for The Brexit Party to gain some seats.
Whatever the outcome, campaign promises, opinion polls and the fact that the outcome is uncertain are all likely to cast a shadow over the pound that causes more volatility.
International payments in uncertain times
Currencies can benefit from certainty, and that is currently in short supply for the UK and the pound. If you have international payments to make in the coming weeks, you may be concerned about the value of sterling. Until the matter of Brexit is resolved, there is likely to be continued volatility and the pound may be under pressure. That doesn’t mean you have to put off your plans, and it may be that you can’t wait to make a currency transfer.
How do I make the most of my money while the pound is so volatile?
As in politics, there are no guarantees but there are ways to make the most of your money. As well as keeping an eye on the news, you can plan ahead and use currency tools, exchange money online when the time is right for you and check in with our expert team on the latest market movements. Remember that while Brexit may be dominating the headlines and causing volatility for the foreign exchange market, it isn’t the only factor that may influence the value of the pound.
Expert guidance and specialist currency tools can help you navigate through the continued uncertainty in the political arena. We can’t gaze into a crystal ball and predict what will happen next, but we can support you with any overseas payment you need to make as the uncertainty continues.