The value of the pound since Brexit

Brexit has been one of the key factors influencing sterling over the past two years. Discover the main events that have driven the value of the pound since the Brexit referendum.

Brexit referendum shocks forex markets

June 2016

On 23 June 2016, the UK voted to leave the EU. This decision took markets by surprise. Due to last-minute polling which suggested that ‘remain’ had the edge, sterling initially rallied – with the pound to euro rate before Brexit rising to €1.32 (GBP/EUR), while also reaching highs of $1.50 against the US dollar (GBP/USD).

But as the Brexit result reverberated around the world, the pound experienced its largest intra-day collapse in 30 years. Sterling fell harder against the dollar than it did against the euro – reaching lows of $1.32 and €1.20 respectively – as the eurozone was already facing internal struggles over an Italian referendum and French elections.

Threat of Article 50 sinks the pound’s value

October 2016

Market panic was exacerbated by the news that David Cameron would be stepping down as Prime Minister. In the following weeks the pound saw volatility as a leadership contest within the Conservative Party ensued, resulting in Theresa May taking the helm on 13 July 2016.

Despite May’s ‘Brexit means Brexit’ rhetoric, the potential for political stability helped sterling make its way to $1.34 – its highest price against the dollar since the referendum.

But in October, the pound fell again as May announced that the UK would trigger its exit from the EU in March of the following year. Sterling sunk to €1.11, a three-year low against the euro, and fell against the dollar to $1.23 – reaching intra-day lows of $1.18 for the first time in 30 years.

In January 2017, the pound fell to $1.21 as Brexit uncertainty continued to spread, and traded below $1.20 for the second time since the referendum.

Soon after, sterling clawed its way back to relative stability, despite Article 50 being triggered on 29 March 2017. The pound gained against the euro, and saw only minor declines against the dollar.

Sterling rallies in support of a UK snap election

June 2017

In April 2017, May surprised markets by calling for a snap election. Cable finally broke out of the $1.20 to $1.27 range it had been stuck in since October, as the announcement caused sterling to jump 2.7% to $1.28. The rally came out of belief that a larger Conservative majority would make Brexit negotiations smoother.

But, on 8 June, sterling fell back 2% as the results of the election confirmed a hung parliament. Cable fell from $1.29 to a low of $1.26, while the pound hit a seven-month low against the euro, falling to €1.12.

The election intended to consolidate May’s political powers ahead of Brexit talks had instead weakened her position. The lost seats forced the Conservatives to form a coalition with the Democratic Unionist Party (DUP).

In the months that followed, both sterling and the PM were in trouble as pressure mounted for May to quit her post. This worried currency traders, who feared unstable leadership in a crucial time of Brexit negotiations.

Pound stumbles as BoE hikes interest rates after Brexit

November 2017

As political instability continued to negatively impact the UK economy, speculation arose as to what Brexit’s effect on interest rates would be. The weaker pound had driven up the cost of living and increased the price of imported food, fuel and other goods. Inflation had hit 3% in September, which was the highest level since 2012.

This led to the Bank of England raising interest rates, on 2 November, for the first time in ten years. Though it did not come as a surprise, the pound plunged from $1.32 to $1.30 as traders were concerned over the gloomy forecast of growth, and the uncertain timeframe of future rate hikes.

The pound also fell against the euro, from €1.13 to €1.11.

Phase one of Brexit agreements causes market uncertainty

December 2017

Soon after the interest rate hike, the pound rallied as news that the UK and EU were making progress on Brexit negotiations spread – cable reached $1.35, its best level in weeks.

On 8 December, it was announced that phase one of Brexit negotiations had been agreed upon. Reactions were mixed: while many believed it was a good first step in talks, others feared that the hard part of Brexit was still to come.

Though initially sterling jumped – reaching its highest level against the euro in six months, up 0.3% to €1.14 – it soon fell back as the euphoria of an agreement died down. The reality of the remaining uncertainty played out across GBP/USD and GBP/EUR, pushing it down to $1.33 and €1.13.

Pound rallies as a Brexit transition deal is announced

March 2018

In January 2018, the pound regained lost ground and was even trading above $1.40 for the first time since Brexit.

Sterling remained above $1.37 in the weeks that followed, spurred on by the anticipation of a Brexit transition deal, expectations of another Bank of England rate hike and a weak dollar, caused by Donald Trump’s tariff threats against trade partners.

On 19 March, the EU and UK announced there would be a 21-month transition period, which sent sterling soaring. The pound gained as much as 1.1% against the dollar, reaching a three-week high of $1.40. Sterling also climbed 0.8% against the euro, trading above €1.15 for the first time since the snap election.

Sterling continued to gain on the back of the agreement, trading at post-Brexit highs of $1.43 on 16 April.

But suddenly, Britain’s currency fell off, declining nearly 3.5% to $1.39 against the dollar in ten days. The trigger for the sell-off was suggestions that the Bank of England would not be raising interest rates, despite the fact the UK economy had only grown 0.1% in the first quarter of 2018.

Cable reached a four-month low, trading at $1.35, on 3 May after pro-Brexit ministers announced they would be demanding a clean break from the EU customs union – a direct challenge to May’s tendency toward compromise.
Despite a plunge to $1.32 towards the end of May, sterling remained trading close to $1.34 in the month that followed and returned to normal volatility levels.

Fears of a no-deal Brexit pound Britain’s currency

July and August 2018

The price of the pound climbed in early July 2018 as news broke that David Davis would be resigning from his position as Brexit secretary. His decision came after he voiced criticisms of the Chequers plan – the proposal that outlines the government’s preferred Brexit outcome.

Despite rising uncertainty in May’s government, this was seen as increasing the chances of a soft Brexit. By midday on 9 July, sterling had risen 0.56% against the dollar to $1.33 and increased against the euro too, up to €1.13.

But, just one day later, the news that Foreign Secretary Boris Johnson would also be resigning pushed the pound back into its downfall. During the afternoon of 9 July, it fell back to $1.32 and €1.12.

In the month that followed, the pressure on sterling continued. The British currency was down against all other major currencies amid fears that Britain would be leaving the EU with no deal. Sterling fell below $1.29 for the first time in 12 months on 8 August after comments from Bank of England Governor Mark Carney and International Trade Secretary Liam Fox spread uncertainties over Brexit negotiations.

The pound’s road to recovery is looking longer with every mention of a no deal Brexit, making it unlikely that markets will regain confidence until there is more stability in the negotiation process. Although the government is attempting to reassure the public that they expect the remaining talks to be successful, currency traders are still preparing for every possible outcome.

Brexit deal uncertainty hits the pound

November 2018

The pound started to rally in early November as it looked likely that May had agreed a draft deal with Brussels. And sure enough, on Wednesday 14 November, May shared the news of a Brexit deal. Sterling leapt 1.4% against the dollar to trade at $1.30 and reached a near-seven month high against the euro, trading at €1.15.

But, as the announcement settled in, the pound began to fluctuate on the back of minister resignations and internal disagreements. Keep up to date with the latest Brexit news with our news and trade ideas section.

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