The British pound fell on Wednesday for a record thirteenth consecutive day against the euro. The currency is taking a Brexit-induced beating days before May’s half-term school break — a popular time in the UK for family holidays.
With half-term and the summer approaching, Brits will be frustrated with recent movements in currency markets which promise to make holidays more expensive.
On Wednesday, the British pound was on course to lose value against the euro for a thirteenth consecutive day — a record losing sequence driven by no-deal Brexit fears and a reluctance among investors to accept risk. When last seen, sterling was buying fewer euros than at any point in the last 3 months, at €1.133.
Recent events mark a turn in fortunes for the pound, which had started 2019 well. The currency advanced between January and mid-March to a 22-month high of €1.18, though that was still well down on pre-Brexit levels. In the lead-up to the UK’s referendum on EU membership in June 2016, sterling bought €1.31.
Against the US dollar, sterling has weakened in 12 of the past 13 trading days to a 4-month low of $1.266.
The latest bout of sterling weakness has been driven by a backlash against Prime Minister Theresa May’s “last chance” offer to British MPs — a fourth vote on her withdrawal deal which, if passed, will be followed by a legally-binding vote on a second referendum. May has also offered new guarantees on workers’ rights, the environment and the Northern Ireland border.
The response to May’s plan has been scathing, and clearly not what she had hoped for.
Opposition leader Jeremy Corbyn, Brexit-supporting Conservative MPs and the DUP have all said they will vote against the deal.
One British newspaper headlined on Wednesday with “Desperate, deluded, doomed” above May’s picture.
Jacob Rees-Mogg, chair of the ERG, a Eurosceptic Conservative faction, said in a tweet that the “latest proposals are worse than before.”
May’s final effort also fell flat with the EU.
This can now go several ways: to a UK general election, to a second referendum that cancels Brexit (or which affirms it), or to May’s departure and the appointment of a Brexiteer PM who might take the UK out of the EU without a deal.
It is the latter — a no-deal exit from the EU, whether intentional or accidental — that investors fear most, and which is driving pound exchange rates lower. It is this, though, that is becoming increasingly realistic.
With Theresa May’s departure imminent, the next leader of the UK could be Leave-voting Boris Johnson. The popular former London mayor is a firm 7/4 favourite with British bookmakers in the “next PM” market and is a man who might endorse no-deal if the EU reaffirms that it is unwilling to reopen negotiations. Johnson has previously expressed support for a “Super Canada”-style Brexit but that would require a “let’s start again” negotiating policy.
So where now?
In its GBP forecasts, HSBC estimated earlier this year a GBP/USD rate of only $1.10 should no-deal come to pass.
Brit holidaymakers will be hoping that the pound’s record losing streak ends soon, but with exchange rates as they are, crossing fingers won’t be enough; practical steps should be taken to assure maximum overseas spending power. Consider Travel Money comparison calculators or a free multi-currency account, complete with Mastercard debit card, that allows account holders to spend overseas at the interbank exchange rate.
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