Mounting Brexit Concerns Suppress The Pound Sterling’s Performance To 28-Month Low
Brexit talks have so far demonstrated a negative impact on the Pound Sterling’s (GBP) performance, especially this year and it looks like the situation has continued to get worse. The currency tanked to a 28-month low after the new U.K. government's stand on the Brexit issue.
The GBP dropped by about 1.1% to about 1.1004 against the Euro and 1.2242 against the U.S. dollar. ING Group analysts believe that the Pound will likely continue to lose some ground especially now that traders are placing last-minute deals on a potential deal with the E.U. Many business owners have requested the government to eliminate the option of a no-deal Brexit in the interest of maintaining good business flow in the U.K.
ING Group currency strategist, Petr Krpata, pointed out that the Pound took a hit after the events that took place during the weekend when it became clear that the government is preparing for a no-deal outcome. No-deal planning officer Michael Gove confirmed that the government is leaning towards the assumption that the upcoming Brexit negotiations will not yield a deal.
Having a no-deal or hard Brexit means that the U.K. will exit the European Union without a definitive trade agreement, and this could end up hurting businesses in the country. This subsequently means that the economy will end up suffering, thus negatively affecting the value of the Pound.
The events of this past weekend sent the Pound Sterling tumbling to about 1.2049 against the US dollar. This is a level that was last seen in January last year. Some analysts believe that the value of the Pound may drop to as low as $1 in the future. This would be a major setback to the country as well as the U.K. economy. The last time that the currency hit a record low was in 1985 when it was valued at around $1.0545.
Is there a likelihood for things to take a different turn?
As noted earlier, the current outlook is leaning more towards a no-deal Brexit. However, some analysts still believe that the U.K. might strike a favorable deal if the E.U. is willing to agree to such. U.K. politicians have also criticized the European Union for making it difficult to reach a deal.
Analysts also believe that the new Prime Minister, Boris Johnson, might help shift the situation in favor of the country if he, along with his government is willing to work on getting a good Brexit deal.
Boris has been known as one of the vocal leaders that want the U.K. to exit the E.U. with or without a deal. However, there is no denying that a hard Brexit might hurt the country’s economy.
Johnson recently stated that his government is willing to negotiate a good deal with the E.U., which means that there is still some hope to avoid a bard Brexit. If that were to happen, then it might help ease the burden on the Pound, helping to improve its performance against other currencies.