Brexit continues to pound sterling into submission against US dollar
Sterling has been hammered ever since the Brexit vote on 23 June 2016. Every prediction of a “no-deal” from those in power adds to sterling’s woes. On Thursday, the pound fell by 0.2% against the US dollar to under $1.28 (GBP/USD) – just a day after the pound broke the $1.29 mark for the first time in a year.
The UK has eight months until it leaves the European Union. However, a no-deal Brexit would be the worst outcome for the markets, costing the economy £400bn by 2030, according to some estimates.
So investors have failed to find solace since Bank of England governor Mark Carney and international trade secretary Liam Fox both separately said that a no-deal Brexit is increasingly likely. On Sunday, Fox said that the EU is pushing Britain closer to walking away from the bloc with no deal while Carney said last week that a the likelihood of a hard Brexit is “uncomfortably high”.
Analysts point out that the health of the pound hinges on the Brexit deal.
Thanos Vamvakidis, head of G-10 foreign exchange strategy at Bank of America Merrill Lynch told CNBC that the pound could sink or soar by 10%, depending on whether or not a deal is in place for Britain with the EU when Brexit happens. Nomura strategist Jordan Rochester also told the BBC: “We remain bearish on the pound in the short term until the Brexit mess is out the way.”
It remains highly uncertain what Brexit is going to look like on 29 March 2019, but it is clear that a long-term bet on the pound against the dollar could be one of the best or worst bets to make now.