Boris' bill faces vote later today

A key element to the Pounds recent fall has been due to the PM's internal market bill, which allows the UK to scrap parts of the already agreed withdrawal agreement. Critics say the bill is breaking international law, whilst advocates say the bill is protecting the UK in a worst case scenario. If the bill is passed, we expect to see more £ weakness.

Even though at the time of writing Sterling is trading up 0.5%, we are still down 3% across the board in a week. £-$ rates have lost 5% since the month began, meaning a loss $650 for every £10k exchanged. The € was given a surprise boost last week with ECB President Christine Lagarde confirming the Euro's strength is not currently a concern and that EU countries should keep job support schemes in place to avoid a sharp rise in unemployment. So where does the Pound go from here?

The majority of analysts predict Sterling to carry on it's poor performance near-term, but see a recovery by year end. Investment bank BNP Paribas have that exact view and believe that there is too much political and economic pressure to not reach a deal. Their latest report suggests a 1-2% drop is likely, before a 'thin-deal' is agreed which should send £-€ rates back to 1.15 mid-market.

The Pound suffered its worst trading week since mid-March last week, as chances of a no-deal Brexit increased to 50%. We believe there will be some sort of a deal agreed between the EU & UK, but we remain limited in our view of how high the Pound could realistically go this year. The surge in Covid cases and consequentially tightening of social rules, may lead to some sort of lockdown near-term. If a second wave truly hits, there is no doubt the £ will suffer again. Then there is the real unemployment figure that will come in November (once the furlough scheme ends) and paint a bleak picture. 

The volatility and chaos in the market currently makes our job impossible to guide clients on what to do and expect for their money. And so if you aren't already hedging your bets (exchanging bit by bit), you need to at least set both high and low rate alerts or limit orders, to allow you to exchange if the rate recovers suddenly or starts to dramatically fall again. 

We have another action-packed week ahead of us in terms of economic data with the UK producing important figures daily. Wednesday & Thursday hold the key for market volatility.

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