The eyes of the financial world have been firmly fixed on the UK economy since the results of the EU referendum three years ago. Every month that passes appears to bring significant new currency information to the forefront and experts, including Privalgo, are watching with interest to see if the British pound can fully recover from the 2016 result.
Below you’ll find a month-by-month overview of how the pound has been performing in 2019, with potential explanations for the trends.
The year started optimistically in terms of the British pound, with a 0.05% rise in January. Following a slump in 2018, this came as great news and was thought to be a direct result of Theresa May securingameaningful and positive vote about Brexit. Experts claimed that the seemingly diminished chance of a no-deal Brexit was reflected in the more favourable rate.
The meaningful victory of January was soon forgotten when deadlock was, once again, experienced in Westminster. Failure to agree on an EU deal or a way to proceed saw the pound remain steady, albeit very low. Towards the end of the month, a spike in value was witnessed, in response to the potential for an extension to the 29 March exit deadline. This renewed hopes of a softer Brexit.
EU leadersformallyagreed to Theresa May’s Article 50 delay plan, leading to the pound regaining some ground. The increased likelihood of a deal, soft Brexit or even Article 50 being revoked altogether instilled confidence in investors around the world and the pound enjoyed a little extra stability. It didn’t witness huge growth, but didn’t fall.
Agreeing an extension to the timeframe allotted for the UK’s departure from the EU, the Government directly impacted the strength of the pound, giving it a boost. The determination to find a workable deal appeared to keep the pound buoyant, despite domestic political upheavals. Regular talks were still being held in Europe and though progress was slow, a deadlock hadn’t been reached.
At the end of May, the pound was stagnating, with a view to dropping significantly following Theresa May’s official resignation and explanation of her timeline for leaving Number 10. This came after the pound dropped to a three-month low, following May’s confirmation she would leave her post after failing to secure a suitable deal with the EU. This also triggered immediate panic regarding who would be replacing her.
The pound sank to its lowest level of the year so far in June, amid a seriously tumultuous political landscape that saw Theresa May agree to leave her post as soon as a successor was named. The potential for Boris Johnson to win caused predictions that the pound would fall, due to his unyielding stance on leaving the EU and seemingly tactless approach to world politics.
July saw the pound plummet to its lowest value since 2017 and take the title of worst-performing major currency. The reason for this seems to have been the impending leadership contest result within the Conservative Party, which would decide on the UK’s new Prime Minister. Increasing fears of a no-deal Brexit were also cited as a reason for the weakened pound, as the favourite candidate for Conservative leadership talked of a zero-tolerance approach to leaving.
Domestic political upheavals had a significant impact on the strength of the pound in August, to the extent that the currency was widely considered to be wholly unstable and remained in a worrying weak state. The prorogation of parliament was a significant event that has caused concern as to Boris Johnson’s style of leadership, thus undermining the country on the world stage and, by proxy, the pound.
A pertinent mix of international and domestic news headlines have made for a weak pound in September. With Johnson making front-page news almost every day, confidence in the UK has fallen and with it, the pound’s value. Most observers are citing the threat of a do-or-die approach to leaving the EU on 31 October 2019 as the most significant threat to a growing pound.
Only time will tell how the rest of the year will play out, but 31 October is the next date that is set to have a deeply significant impact on the pound. Whether the UK secures a deal, leaves the EU without one, or seeks to extend Article 50 again, there will be instant and serious ramifications for the strength of the pound.