It’s that time of year when minor celebrities risk humiliation in Strictly Come Dancing. They’re not the only ones approaching September with a few nerves: anyone about to make a major purchase abroad faces a tense few weeks. Substantial movements in the GBP exchange rate have been on the horizon for some time now, but the pound’s so far shown only little movement. However, with events finally coming to a head, that’s set to change. From now on, predictions don’t so much diverge as do the splits.
Where might the pound go?
The pound could go absolutely anywhere. As you can see in our Quarterly Forecast, the major banks’ predictions for GBP-EUR have a range of 16 cents. For USD, it’s an even wider 21 cents. All this could have a major impact on the GBP exchange rate.
(*Reuters Smart Estimate by StarMine, a division of Thomson Reuters)
What could cause the GBP exchange rate to rise or drop?
We’re entering a particularly volatile period, with political and economic developments coming to a head. Here are the three main factors that will influence the pound?
1. First is party politics. Theresa May’s facing a tricky month. We could end up with anyone as Prime Minister by the time Strictly finishes at Christmas, from Jeremy Corbyn to Jacob Rees-Mogg. That’s quite a choice of dance partners – and one that could push the pound down.
2. Second is economics. GDP’s been sluggish, but that’s because companies have held onto some £60 billion in banks since the referendum. With a sign of a deal, this could burst forth like Anton du Beke in a show-dance spectacular. Any sudden flood of capital could, however, send the pound back down.
3. Third is, of course, Brexit. The key summit’s on 18th October. If the UK and the EU find a rhythm by then, the pound could high-kick like Fred and Ginger. No deal and the pound will be flatter than Ann Widdecombe’s tango. And we’ll go through the same process again as they try again at the next summit on 13th December.
So there are excellent reasons for the pound to go up and excellent reasons for the pound to go down. In other words: no-one really knows what’s going to happen on the currency markets.
Luckily, you can protect your money against this risk. Your Personal Trader can book you a forward contract so you can lock into an exchange rate for up to 12 months – and you know exactly how much you’re paying, no matter how much the markets move.
If you want to safeguard your budget, get in touch with your Personal Trader on +44 20 8108 2279 to find out more about using a Forward Contract.