The pound continues to trade on the back foot amid the current political uncertainty and the implications this might have for Brexit. As of 29th May, the GBP had fallen to lows of 1.25 against the USD, and 1.12 against the EUR.
With the recent bank holiday long weekend and no major UK or US data foreseen in the near future, traders remain focused on the leadership race currently underway. What does this mean for businesses and how can people prepare during the seemingly unending uncertainty that comes with ongoing Brexit news?
As we know, UK Prime Minister Theresa May has agreed to stand down as leader of the Conservative Party as of the 7th June. This comes after May failed to get a Brexit deal backed by MP’s and faced a cabinet rebellion.
Why did May fail to push a Brexit deal through?
May faced opposition on all sides back home on her EU back deals, from the pro-Brexit and pro-Euro flanks in her own conservative party, from the Northern Irish Party and from most of the opposition Labour Party which wants to maintain trading ties with the EU to protect jobs.
The gridlock eventuated into May’s retirement, now leaving two Prime Minister’s defeated by the total impasse of negotiating a suitable Brexit deal.
What happens now?
Now the leadership race begins. We are likely to see a new leader before the summer recess (end of July in the UK) as the process for finding a new leader will begin the week following May’s departure, with May remaining in the wings until the new leader is chosen.
There is a risk that we may have a pro-Brexit hardliner elected who is prepared to leave the EU with no-deal. This is largely due to the fact that the new leader being elected will be chosen by 120,000 conservative grassroots members, most of whom want a hard Brexit.
We’ll be back to where we are now, just with a different leader at the helm, likely contained by the same restrictions that May faced. There is a growing sense that a general election may be needed to break the Brexit impasse.
Wasn’t the UK supposed to leave by now?
Earlier this year, the EU granted an extension for the UK to leave the EU until the 31 October, 2019 after a deadlocked parliament refused to consolidate on the original deal May had negotiated with the EU.
With elections taking up most of the time needed for negotiation, Britain could once again be faced with the choice of leaving without a deal, asking for another extension, or calling the whole thing off completely.
The notion of the whole thing being called off is becoming increasingly likely, however, there isn’t a majority in parliament behind a proposal to hold a second referendum, and while Jeremy Corbyn has flirted with the idea, May has been adamant that a second referendum would undermine faith in democracy.
How to prepare for market uncertainty
While the markets are beholden to the movements of Brexit negotiations, there are several ways that businesses and consumers can ensure that their global money movements remain stable and consistent.
For many, simply monitoring how the markets are performing, both historically and at the present, can help with understanding how they’ll perform in the future. So using Rate Alerts to set a desired transfer rate, or following OFX’s regular Market News are great options for preparing for volatility.
At times where the rates are completely unpredictable, as can happen with Brexit news, locking in a rate using a Forward Exchange Contract can be a great way to ensure consistent pricing if you’re operating a business. Or if you think a desired rate may be coming up, you can lock in a Limit Order, and if that rate hits, we’ll notify you to make the transfer.
IMPORTANT: The contents of this blog do not constitute financial advice and are provided for general information purposes only without taking into account the investment objectives, financial situation and particular needs of any particular person. UKForex Limited (trading as “OFX”) and its affiliates make no recommendation as to the merits of any financial strategy or product referred to in the blog. OFX makes no warranty, express or implied, concerning the suitability, completeness, quality or exactness of the information and models provided in this blog.