Volatility in pound to end
Published on 10.01.2018 12:22

The British pound has been a trader’s heaven over the last year as the uncertainty of Brexit negotiations has seen the currency swing widely in one direction then the other but some predict the volatility this year will be a lot less and significant swings in the pound won’t be seen until the end of the year.

Now that the first round of Brexit talks between the EU and the UK are out of the way, the second stage which is trade negotiations has begun with the main topic being will Britain remain in the single market or choose hard Brexit and leave the block without a deal.

Negotiations are likely to continue until October until a final decision has been made and in the meantime, the predictions are the pound will remain relatively stable until the deadline approaches.

“Brexit is likely to increasingly become an issue again over the coming days. But in the end the scramble about the start of the second phase of the Brexit negotiations confirmed that the talks will only see a breakthrough when a deadline is approaching and ultimatums are presented,” says Esther Reichelt, an analyst from Commerzbank.

 “The next deadline that is currently under discussion is only in October when it is hoped that the parties will have come to an agreement regarding a trade agreement. As little is likely to move on the Brexit front for now, and a further Bank of England rate hike is unlikely to be an issue over the coming months due to the rather weak economic outlook, GBP exchange rates are largely determined by external factors,” he added.

The British pound jumped 10 percent against the US dollar in 2017 but most predict the currency will finish close to current levels against its US counterpart at the end of the year.


Andrew Masters

Analyst

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