Loading...

Home pages - full list (A-Z)

Pound to Lose 25 Percent on Disorderly Brexit, Bank of England Warns

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.

#News #GBP #USD
Email share     Facebook     LinkedIn    Twitter

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.

GBP to NZD - 1 Week chart - Latest
GBP/NZD - 1 Week Chart - Latest

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.

GBP to USD - 1 Week chart - Latest
GBP/USD - 1 Week Chart - Latest

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.

 

Further Reading

 

Australia Cuts Interest Rates to Record Low

RBA Australian dollar AUD currency news and forecasts

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: 2 Jul, 2019

GBP’s Bright Start to the Year Is a Distant Memory

The British pound was the worst-performing major currency in the April-June period and remains “impossible to forecast” amid a Tory leadership battle that might force “no deal” or a general election.

Last update: 30 Jun, 2019

Australians Swerve Thai Holidays with Exchange Rates in the Gutter

With AUD-THB at a 10-year low, Australians travelling this year to Thailand’s wildly popular resorts are facing holiday costs 50 percent higher than those paid in 2012. With exchange rates as they are, those in Oz are choosing better-value destinations.

Last update: 23 Jun, 2019

  

Posted to: News

 
 
Please note that the opinions of our authors are their own and do not reflect the opinion of Best Exchange Rates and should not be taken as a reference to buy or sell any financial product.
 

Get a Better FX Deal when you Send and Spend Abroad.

 

Do NOT follow this link or you will be banned from the site!