• 144 days Could Crypto Overtake Traditional Investment?
  • 149 days Americans Still Quitting Jobs At Record Pace
  • 151 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 154 days Is The Dollar Too Strong?
  • 154 days Big Tech Disappoints Investors on Earnings Calls
  • 155 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 157 days China Is Quietly Trying To Distance Itself From Russia
  • 157 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 161 days Crypto Investors Won Big In 2021
  • 161 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 162 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 164 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 165 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 168 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 169 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 169 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 171 days Are NFTs About To Take Over Gaming?
  • 172 days Europe’s Economy Is On The Brink As Putin’s War Escalates
  • 175 days What’s Causing Inflation In The United States?
  • 176 days Intel Joins Russian Exodus as Chip Shortage Digs In
  1. Home
  2. Investing
  3. Forex

Pound Falls Further As No-Deal Brexit Looks Increasingly Likely

Pound

The pound is taking a pounding versus the dollar, euro and other currencies as the possibility of a no-deal Brexit looks increasingly likely.

Under new Prime Minister Boris Johnson, the government has strengthened its stance on a no-deal Brexit, which it has said is "now a very real prospect".

The pound - which was trading at about $1.50 versus the dollar before the EU referendum in June 2016 - has fallen by 2.4% since Monday, when a spokesperson for Downing Street said that the UK would not enter talks with Europe unless the so-called Irish backstop is scrapped.

This week’s selloff shows little sign of a rebound, with options markets implying more pain on the horizon. Three-month implied volatility, a contract that expires just before the Oct. 31 Brexit deadline, jumped to the highest since before March 29, the original date for Britain to leave the European Union.

Pound looks weaker as no-deal Brexit looms

A no-deal Brexit would likely involve the construction of barriers to Britain's trade with its biggest international partners.

The probability of that outcome, which most economists state would be severely harmful to the British economy, was seen to have increased as Johnson designated a cabinet loaded with Brexit supporters. That, together with his hard line on rebooting negotiations with the EU, has lowered prospects for a last-minute deal. Related: Positive Economic Data Weighs On Gold

The move will likely lessen UK economic output, which implies the UK is a less profitable bet for global financiers.

It indicates the Bank of England might need to cut rates of interest, which once again implies lower returns on UK financial investments.

Laura Lambie, senior investment director for Investec Wealth & Financial investment, warned that the pound could fall even more if the UK crashed out of the EU without a deal. "I do think that investors are looking at a no-deal as a risk, not a certainty," she said. "That does mean that if we do come out of the EU without a deal, then sterling has further to fall."

By Michael Kern 

More Top Reads From Safehaven.com:

Back to homepage

Leave a comment

Leave a comment