Sterling's future looks uncertain amid Brexit shambles.Getty
As the Brexit shambles continues, the rate of the Euro to Sterling remains unclear.
The pound started declining close to the Brexit referendum in June 2016 and was slashed more than an additional 5% once the results of the referendum were published. Since then, it has been on a constant roller coaster driven by uncertainty. The most recent events in the UK-EU saga includes an announcement about the agreement being reached in November, resulting in major support for the Sterling, then, Theresa May postponed the UK parliament vote while admitting she does not have enough support to pass her agreement, resulting in theSterling’s collapse, only to recover slightly after May won her no-confidence vote.
With upswings and downswings of as much as 1% daily in the rate, it’s difficult to prepare accordingly if you need to constantly move money between the two currencies. For this very reason, people have been sitting on the fence when it comes to sizeable transfers. The general notion says that the GBP to Euro rate will eventually improve - if you had a large amount to transfer from Euro to Sterling, you must have done that shortly after the Brexit decision when the GBP was at an all-time low against the Euro; If you have a large amount to transfer from GBP to Euro, you are going to wait indefinitely until the rates get back to where they were.
That fence-sitting mentality is starting to shatter. Jeremy Zin, the website manager of International Money Transfers, a site specializing in cross-border transfers, has noted that its guide dedicated to transferring money from and to Ireland has been seeing increased activity over the past month and in particular - last week. It appears that the notion that the UK economy will necessarily recover from the referendum vote’s consequences and will eventually find its path towards a mutually beneficial trade agreement with the EU is no longer valid.
The odds of a no deal Brexit has gone up and the odds of a second referendum are lower than before, hence many individuals and businesses who have their savings in Sterling are looking for cost-efficient ways to transfer them to Euro. That bodes well with the fact the new populist government in Italy has adjusted its budget to fit the targets set up by the EU, and the ECB feeling confident enough in the EU economy to stop its quantitative easing program.
Perhaps the most concerning aspect of the UK economy is that the Brexit vote was not a one-off event. Theresa May has managed to come up with a reasonable agreement that serves the interests of everyone involved (first and foremost Britain, but of course Ireland and the EU as well) and it has been rejected because it is, supposedly, simply not drastic enough. The British parliament has almost surely rejected the only plausible solution to a very complex question, and there could be only one result - a no deal Brexit, revising the very essence of the Good Friday Agreement.
The medium- and long-term prospects for UK economy don’t seem too bright. Bookies are already crowning two prime candidates to replace Theresa May which has announced she will not be leading the conservative party in the 2022 general elections - Boris Johnson and Corbyn.
To summarize - it is safe to assume that the Sterling to Euro rate will drop an additional 10% over 2019 and 2020 to eventually reach a state of parity, but nothing is certain especially considering the high pace of happenings relating to the Brexit.