Ask the expert

Will Shepherd, Head of Treasury at OFX

How will the Brexit negotiations affect exchange rates?

As Brexit talks continue, we should expect to see increased volatility for the pound, euro, dollar and other major currencies. The final impact on currencies will depend on who holds the strongest political leverage once the Brexit process is complete, but geopolitical and economic factors will play a key part. Tensions on the Korean Peninsula, Angela Merkel’s political fortunes, and the continuing leadership struggles in the UK will all impact on the health of the pound. And though it seems unlikely, a potential reversal of the Brexit vote could instantly give sterling a huge bump.

Is the pound undervalued after the post-brexit vote slump?

Since slumping in the wake of the June 2016 vote, the pound has recouped more than 9% against the dollar. These gains are the result of better-than-expected UK data and an unexpected change in the Bank of England’s stance on inflation, which led to an interest rate rise this month that few predicted in the summer. With unemployment at a record low of 4.3% and significant increases in exports, manufacturing and output, a stronger outlook for the pound might be expected. However, the impact of geopolitical events on currency value has become increasingly evident in recent times.

As the pound continues to fluctuate, OFX offers a range of risk management solutions that can help minimise the impact of market stress and protect against sudden market shifts. If you’re expecting to make an exchange to pounds, you may also want to consider a forward contract to safeguard your ‘Brexitdiscount’ now.