Home pages - full list (A-Z)

Pound to Rebound Higher in 2019, Says SEB; No-Deal Brexit Unlikely

2019 will be a good one for the British pound, thinks a foreign exchange analyst at SEB. Recent depreciation is overdone, the analyst says, and will be corrected once markets begin to price in the improbability of a no-deal Brexit. Investors should expect a GBP/EUR rally into the mid-€1.17s or higher.

Email share     Facebook     LinkedIn    Twitter

The British pound has been the second-best performing major currency over the Christmas period. Relative to the US dollar, sterling is showing a gain since the week ending December-14 of 1.7 percent and, at $1.28, is now at a 3-1/2-week high.

Much has been said in the media about delays to the “meaningful vote” on Prime Minister May’s withdrawal agreement and what it means for no-deal probabilities should the agreement be rejected by the House of Commons, and about no-deal impacts on the British currency. To state the obvious, nearly all of those media releases and economic analyses have worked to ramp up negativity on the pound, and this is reflected in current exchange rates. Against the dollar, for example, sterling is worth 11 percent less than it was in April.

The market is, though, far too downbeat, according to analysts at Swedish bank SEB, who join a growing collective of experts believing in the improbability of a no-deal Brexit. As a result of negativity, sterling is significantly undervalued.

“We don’t expect a hard Brexit,” says SEB’s Richard Falkenhäll.

“Tory hardliner Brexiters will at some point realise [May’s] deal might be the only way forward.

“Parliament will have to make a decision to stop a no-deal withdrawal before March-29. All other outcomes other than [no-deal] will likely strengthen GBP from its current level.”

To agree to May’s deal would be to walk sterling away from the proverbial cliff edge, says Falkenhäll, and would lead to “a significant recovery.”

Even if the withdrawal agreement is rejected by British MPs, there remains the option to push back the exit date beyond March to allow for further negotiations, or to hold a second referendum, both of which would increase the likelihood of the UK remaining in the EU—undoubtedly the best-case scenario for UK markets, and one that might add 15 percent to sterling’s value within a short period of time.

With all that said, SEB expects significant sterling appreciation in 2019, with a target for GBP/EUR—economically the most important pound exchange rate—of €1.1765 (EUR/GBP £0.85) based on the current withdrawal agreement being passed. Should Brexit be cancelled, however, considerably more upside is likely.

Though SEB declined from offering a GBP/USD forecast, under its assumptions a 2019 rally into $1.37-$1.40 territory seems reasonable.


Further Reading


Disruptors Challenging Australian Banks in Forex Price and Service: ACCC Report

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

AUD/GBP Between a Rock and a Hard Place – USD Strength


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

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: 14 Aug, 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!