The British pound weakened against all major currencies on Thursday, a day after the Bank of England offered a stark warning on Brexit. Under a “no deal” outcome, sterling will lose between 15 and 25 percent of its value, the Bank said.
The British pound is back under pressure on Thursday, a day after the Bank of England painted a grim picture of UK life under a no-deal Brexit.
Sterling fell across the board, with a special note saved for GBP/NZD, which sank to its lowest rate since October 2017, at just N$1.8572. The pound was worth 10 percent more against the kiwi only 7 weeks ago.
Having slipped by two-thirds of a cent, sterling’s benchmark exchange rate, GBP/USD, traded on Thursday at $1.276, ahead of significant support between $1.266 and $1.27.
To senior members of parliament, the BoE described on Wednesday a number of scenarios for post-Brexit life, based upon stress tests of the UK’s economic and banking systems.
In the event of a “disorderly” no-deal outcome, under which there will be serious border delays and a marked loss of confidence in Britain’s financial markets and institutions, the BoE predicts UK economic contraction of 8 percent in the space of a year (that’s more than during 2008’s financial crisis) and a spike in unemployment, inflation and interest rates. Crucially, it also sees sterling worth 25 percent less, at levels sub-$1.0. House prices, too, will bite the dust, with a 30 percent fall.
The BoE stresses that the worst-case scenario painted above is not its base expectation; it is, however, an all-too-real possibility and a warning to British businesses that adequate preparations must be made.
More likely to transpire is what the BoE is calling a “disruptive” no-deal Brexit, under which goods face tariffs but flow somewhat easily, and in this case sterling still loses 15 percent of its value and GDP falls 3 percent.
The UK is scheduled to leave the EU in precisely 4 months’ time, on March-29 2019.
Key Takeaways from the ACCC inquiry into currency conversion services. BestExchangeRates referenced among comparison sites playing an important role in customer awareness of the excessive currency margins charged by banks.
Last update: 1 Oct, 2019
Both the Australian dollar and British pound sterling have had a hard time of late caught between the rock of the China/US trade war and the Brexit hard place.
Last update: 27 Aug, 2019
The RBA has cut Australian interest rates to a record low of 1 percent in an effort to boost inflation. The Australian dollar is slightly stronger following the widely expected decision but is expected to lose 5–7 percent of its value before year-end.
Last update: 14 Aug, 2019