Bank of Ireland provided its latest update on Brexit as Ben Murphy and Lee Evans sat down to go through all the latest developments.
Ben Murphy from Bank of Ireland’s corporate and institutional sales team was joined by Lee Evans, head of foreign exchange (FX) trading to discuss the latest developments in the UK.
The two focused on the constant change in the Euro-Sterling markets as well as the challenges facing British Prime Minister Boris Johnson.
A lot has happened in Britain recently with the main events seeing Boris Johnson probing parliament, suspending parliament and trying to take control of his Brexit, but parliament fought hard against this and took control. They voted to pass a bill to avert a no-deal Brexit and a pushback on Johnson’s drive for a general election before October 31st.
“There are Sterling sellers who have had a good chance to move down from 93p to below 90p to really maximise a good rate and take the 4% swing into their favour”
Despite so much uncertainty surrounding Britain’s future, Lee Evans eluded to the Sterling starting to perform strong again. “The last couple of weeks have been very busy as we’ve seen volatility in Euro-Sterling move to highs not seen since the first quarter. Sterling had been trading at lowest levels against the Euro and the US Dollar since Q1, but we’ve seen a 5% rally over the last couple of sessions.”
The Euro-Sterling prices has seen a lot of movement in recent times, and more movement could happen in the coming months. “If you look back to the start of the year, we have been calling for Euro-Sterling with two-sided risks.
“We’ve seen a big move down in Euro-Sterling. We highlighted the fact we got to 85p earlier in the year, which was a good level for some exporters hedge some their risk. In July, we changed our base case to a general election, so in our FX monthly in July, we looked for a general election before the end of the year and it looks likely that will be the case, said Evans.
“Relative to where we have been, with the four-point adjustment back in their favour, it really isn’t a bad time to be buying Sterling”
FX markets are now focused on when the general election will be, whether it be before October 31st which will be a Sterling negative, or anytime after October which would be seen as a positive for the pound and “would see the recent Sterling rally continue”.
Bank of Ireland customers have had a tough year trying to predict and make the correct decision on their FX exposure, especially with the political landscape being so uncertain. “There are Sterling sellers who have had a good chance to move down from 93p to below 90p to really maximise a good rate and take the 4% swing into their favour,” says Ben Murphy.
“On the flipside, our Sterling buyers, while the may not be getting the headline 93p, they must remember that we spent at least five months at the start of the year below 88p, and been down in the 84p handle as recently as May. So relative to where we have been, with the four-point adjustment back in their favour, it really isn’t a bad time to be buying Sterling.
Whichever side of the coin you’re on, it’s worth picking up the phone and having a conversation and discussing your FX requirements with your relationship manager and seeing what could be available to you,” added Murphy.
“He’s seen several cabinet ministers and Tories resign over the last couple of sessions, so his majority in government is effectively gone”
Lee Evans finished by looking towards the future. “We’ve got Boris Johnson going to the EU Summit in mid-October and parliament have asked him to come up with some sort of deal to vote on before the October 31st deadline.
“If Boris can’t push towards getting a deal done, he’s going to be in a tricky position. He’s seen several cabinet ministers and Tories resign over the last couple of sessions, so his majority in government is effectively gone. If he can’t get a deal across the line with the EU, he’ll be left in a difficult position on whether to ask for an extension to the deadline or potentially even resign as prime minister, which would open for a general election post October 31st.
Bank of Ireland launched a new Brexit portal, providing guidance and expertise for domestic and international businesses, and supporting a series of free Brexit events across the country. You can access this portal here.
Written by Stephen Larkin
Published: 12 September, 2019