The Pound has made minor gains against the Euro today but the GBP EUR exchange rate could fall considerably by the end of the month depending on how businesses react to the start of Brexit.
While Sterling is expected to remain relatively stable before Article 50 is triggered, the aftermath could see high volatility and potentially historic losses in the GBP EUR exchange rate.
As well as general uncertainties about the official Brexit start, the Pound could be further devalued by signs that UK businesses are looking to ‘jump ship’ during negotiations.
Among those raising concerns in this area has been UBS Bank Chairman Axel Weber. Commenting on UBS’s future in a UK undergoing Brexit, Weber has stated that UBS will move its employees to ‘a country that will be a long-term EU member’, instead of the UK.
Weber has added that UBS may start to leave the UK shortly after Article 50 is triggered, stressing that;
‘We need an EU member state operation’.
If it does look like UK businesses, particularly those in the financial services sector, are abandoning the UK in droves during Brexit, then the Pound is likely to drop sharply due to severely eroded trader confidence.
For the Euro, the immediate and longer-term outcomes of the Dutch election are likely to have a strong influence on the EUR GBP exchange rate.
If Mark Rutte’s VVD party takes the most seats, the Euro could rally as it would represent a blow to Euroscepticism.
The election is considered as a bellwether of EU sentiment ahead of the larger French and German elections later this year, which amplifies its potential impact on the Euro.
Outside of Thursday’s vote results, the next issue will be forming a functioning government; even if Rutte takes the most seats, he is still expected to struggle collecting enough parties to form a majority coalition.
Problematically, Rutte’s main opposition, Geert Wilders’ PVV, could come in second place but both parties have vowed there is ‘zero chance’ of a political union.
With 28 different parties in the running this year, the new Dutch government may end up being one of the most diverse in the world. For the Euro’s sake, a majority government that is pro-EU and tolerant to migrants will be the best outcome.
Recent Interbank GBP EUR Exchange Rates
At the time of writing, the Pound to Euro (GBP EUR) exchange rate was trading at 1.15 and the Euro to Pound (EUR GBP) exchange rate was trading at 0.86.
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