How Is Brexit Affecting The Price Of The Pound Sterling?

Illustration of person reaching for a pound note

While the value of the pound may have continued to fluctuate since the Brexit referendum vote on June 23rd, 2016, it has largely traded within the ever-depreciating range during the following four years.

This trend began the particular morning after the vote to leave was delivered, once the pound slumped to its lowest level since 1985 and the FTSE 100 shelved 8% off its total value.

In this post, we’ll look at how Brexit has continued to effect on the pound, while requesting what the future could keep in-store for this asset?

The Pound so Far in 2020 – How Has it Fared?

In truth, the pound has generally declined against both the Euro and the US Buck throughout 2020, particularly being a so-called “no-deal” Brexit turns into increasingly likely.

The uncertainty surrounding the particular ongoing negotiations has definitely caused the pound to weaken significantly over time, using the GBP/EUR pair losing one 65% of its total worth between August and September alone.

During the same period, the popular GBP/USD pairing declined by a whopping 3. 11%, despite the fluctuating greenback and the pressures caused as a result of the high-value stimulus measures being discussed within Congress.

As we’ve entered December as well as the end of the transition time period on the 31st of the month has fast approached, the particular pound has continued to reduce ground against its major rivals, while avoiding the kind of sharp and pronounced loss that some predicted would follow the increased likelihood of a no-deal Brexit.

Why is the Pound Ongoing to Keep its Head Above Water?

This particular trend has been borne out there by recent price motions, with the GBP/USD surprising several by breaking back above the resistance at one 3400. Of course , this has much to do with the relative compression of the greenback, but it also illustrates the robust performance from the pound as the Brexit negotiations continue.

Yet what’s the primary factor behind this level of robustness? Nicely, Senior Market Analyst Jeffrey Halley from Oanda thinks that this has much to do with the prevailing market perspective, which continues to price within “practically zero chance of a no-deal scenario” actually happening.

We’ve also seen several leaks which suggest that both sides may have compromised in recent weeks, suggesting that a breakthrough might yet be made prior to deadline day.

This has helped to temporarily drive the pound’s value higher at various junctures during December, despite its failure in order to shift outside of a narrow, 300-point range.

Of course , the future trajectory from the pound depends on the outcome of the negotiations, which are sure to come to an end by December 31st in lieu of an extension agreed by Parliament.

Create no mistake; a no-deal Brexit would cause the particular pound to crash to brand new lows, but for now it continues to hold the head above water since the market retains a positive perspective.

Featured Image: Example of pound sterling simply by Freepik

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