Pound could plunge to parity

09.08.2019 09:43|Daniel Kostecki

Less than three months left to the extended brexit deadline, which is to take place at the end of October. Hence, there are more and more forecasts indicating the possible development of events and trying to determine if and how the pound exchange rate will change.

Market and economists agree that the likelihood of hard brexit has increased over the past six months. In this case, if the United Kingdom left the European Union without a deal, the British pound in relation to the US dollar could fall to the level it was last seen in 1985 - according to a survey conducted by the Bloomberg agency.

The median expectations of the 13 banks surveyed indicate a GBP/USD exchange rate of 1.10 if a hard Brexit occurs. According to respondents, there are 30 percent chances of implementing such a scenario. This is three times more likely than in February. If the above assumptions were met, the British pound could fall by about 9-10 percent.

Other scenarios were also taken into account in the survey: reaching agreement by the end of October, another brexit delay and general election. For the first of these scenarios, the median expectations for GBP/USD is 1.33, which in relation to the current level would mean a significant increase in the price of the pound. For the second scenario, an increase to 1.26 is estimated, and for the third, a decrease to 1.19.

The most pessimistic forecast for the British pound was recently presented by the Morgan Stanley bank, which assumes that in the absence of an agreement with the European Union, GBP/USD will fall to parity. 1.00 has never been seen before. Only once in 1985 the GBP/USD fall below 1.10 to 1.05. It would therefore be a historical event.


Daniel Kostecki, Chief Analyst Conotoxia Ltd.

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

See also:

8 Aug 2019 15:45

The Fed under increasing political pressure

8 Aug 2019 11:17

Saudi Arabia is talking about a possible intervention in the oil market

7 Aug 2019 15:52

The debt market is in the spotlight

7 Aug 2019 10:25

The Reserve Bank of New Zealand surprised the market. NZD plummet

6 Aug 2019 15:18

Gold benefits from a fall in stock market indices

6 Aug 2019 11:13

It was the worst day for the stock market this year

Start chat