Brexit scenarios for euro sterling 220119

Sterling – How will it be impacted by the various likely Brexit scenarios?

Irish businesses that export to Britain closely follow the ups and downs of the Sterling/Euro exchange rate.

Lee Evans, Head of FX Trading & Strategy at Bank of Ireland outlines what businesses should expect in the coming days and weeks.

“If we start first of all with a no deal scenario, the Bank of England forecast that the Pound could fall by 25%.

“We see that as a little bit excessive. The all-time high in Euro/Sterling was 98p, so you would imagine that might be challenged.

“Secondly, if we get some sort of deal, where there’s an agreement from both the EU and UK, then we’d see a movement in the rate towards the low 80’s initially.

“In the event of an extension to Article 50, the Pound is likely not to quite strengthen as much. So the rate will probably head towards 85p.

“The reason for that is the lack of clarity. An extension is positive in that it avoids no deal. But it doesn’t give us clarity on the solution, so we wouldn’t see as strong a move in Sterling.

“We’ve seen huge movements since the referendum vote in 2016. But in 2018, it was the smallest trading range for Euro/Sterling since 2006, since before the global economic crisis.

“But that’s not something we expect to happen this year. We expect much more volatility in the Euro/Sterling rate in the course of 2019.

“We’re not complacent about a no deal scenario but the risks are now two-sided, [in that Sterling could rise or fall, depending on what happens.]

“We’re saying to customers to beware of that, expect it, and to talk to us about it.

“We’re getting to the end of the process here, and Sterling is an undervalued currency. We could see a considerable move as the Pound regains some of the previous fall in its value.

“Bank of Ireland is here to support our customers. We have an experienced team of Treasury dealers who are up to speed on all of this, and who are happy to talk to customers about this at any time.

“Talk to us and see how we can help you overcome the risks.”

Lee Evans is Head of FX Trading at Bank of Ireland Global Markets. Call our Global Markets dealing team on 01 6094300 for further information or Request a Call Back.

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