Article 50 trigger - impact on pound

[bwfc4ife]

Hi Guys,

We were hoping to put off buying our dollars until closer to our trip in August but i've heard recent media reports suggesting that the triggering of article 50 this week will mean that the pound takes a further hit.

What does everyone else think and how are you planning to deal with any further weakening if there is one?

Just wondering if i should go all in now at 1.24. It doesn't seem right though because it is so low compared to last year.

Crystal balls at the ready

[grinner82]

Personally I dont think it will rise much for the next few years, until the full exit is completed.

The triggering of article 50 is already known and the date has been pre set, so there may be a slight dip then back to where its been for the past 6 months around 1.20. I will be basing everything on 1-1 when I am over there.

Buy now, buy later, I dont see it making much difference TBH.

[Mingo]

As you say, it's impossible to exactly predict what will happen. Some say the pound will fall further as a result of article 50 being triggered, others say it's already been "priced in" to the market as traders knew it was going to happen at some stage so the clarification may even make the pound stronger? At the moment there are so many other external factors that can influence the pound and dollar, (Negative economic data, Trump making some wild announcement etc!) it may be worth "hedging" your money, e.g. If you have £1000 to change, do £500 before Wednesday and the other £500 after so at least half your money is getting the best rate?

[teerts]

IMHO the £ has already taken its hit for Brexit, provided the future negotiations are +ve then the £ to $ rate should increase.

There will be many more things which will impact on the rate outside Brexit now

[Perthite]

Hard to imagine that triggering Article 50 will make any difference at all as it is merely a formality, the markets know that we are leaving the EU and the fact that this is considered bad for our economy is already factored into the exchange rate. The thing that WILL make a difference over the coming months is the precise deal that we move towards as negotiations progress. As expectations change as to how good or bad the eventual deal will be for our economy, the pound will move accordingly.

Basically, toss a coin...

[Burgmeister]

If anyone knew which way it would go they would be very rich (And probably not posting on this forum!)

[KEL1180]

I got $1.2593 this morning and was quite happy with that in the circumstances. The highest its been in a while

[Andy C]

No-one knows.
There are a number of views.

Part of the market is based on what is happening, part on what people believe will happen, and part on what people believe other people believe will happen or is happening. Which makes it very difficult to predict, otherwise anyone who could would be mega-rich and not have to worry about exchange rates in any case.

There is a view that some will still be holding out for the UK Government to go "Actually, no, come to think of it, we won't". Others think no-one will be thinking that. Still others that it will cue another assault on the pound, because it's a great trigger for such.
The other view is that this attack has been signposted from space - so only mugs will try for it - and other people will exploit those who try to short sterling by hiking the price.

A slightly longer term view is that inflation is starting to rise. To counter this the Bank of England will raise interest rates from the historically low 0.25%. Probably nothing significant - but a rise to 0.5, or even 1% over say the next six to nine months would strengthen the pound. So if currency speculators thought that was on the cards they would want to get in early, giving an upwards boost yet sooner.

Much drama is also being made about Trump's Healthcare plan, which has caused a wiggle this week. This goes to show how political events in the UK and US will disrupt all the guessing, second-guessing, and third-guessing in the world.

My view is that exchange rates tend to wobble a lot anyway - think about the variance over the past few years before the Brexit step-change, from nearly $2 in 2008 to just over $1.35 in 2009, back to $1.60, down to $1.40 all still in 2009. Over the past few years, we stabilised to an extent, but even when sort-of-stable, we varied between about $1.35 and $1.70
So - we've had a predictable step change (down about 20% or so) and that's now priced in. If we vary around the same extent as in recent years, we could be anywhere from $1.20 being the bottom of a band between $1.20 and $1.50, and $1.30 being the top of a band between $1.00 and $1.30.

Which is a long and possibly boring way of saying - we don't know what the heck is going to happen. In the short term, it all depends on who's guessing, second-guessing and third-guessing what in the markets (all of which can be thrown off by the unexpected anyway) and in the longer term, all I can say is it will very probably be somewhere between $1.00 and $1.50.
(But might be unexpectedly even outside that band)

[cybermum]

Read all over about this. The rate its at now is the floor I firmly feel . They have priced it in already.
I know some say tomorrow it will tank. Some predicting parity with the euro by year end.
Conversely Barclays predict a slow but steady rise to 1.31 by end of year against the Euro.
With slow but steady recovery to in 2018.
They say recovery this year will not occur before the 2nd quarter.
So by 2019 against the dollar to be where we were last April for example.

[Pumba75]

The only thing that is really "priced in" at this stage is that article 50 will be triggered tomorrow - beyond that is a complete unknown and will be determined by how negotiations progress. If they go well then the rate may improve, if not then it may go the other way.

If May, Hammond, Boris, Fox and Davies are as adept in the negotiations as they have been in virtually everything else they've done since taking office then I'd be tempted to buy now ;-)