Brexit As The Main Driver Of Pound Volatility

Forex News

After in June 2016 the British voted for an exit from the EU, the pound lost about 10% of its value. But still, according to economists, sterling is likely to significantly strengthen by the time Britain leaves the European Union in March next year. Still, uncertainty about the relationship Britain can agree with the EU after Brexit continues to cloud the currency's outlook. Forecasts for the 12-month outlook ranged from $1.23 to $1.54.

It is forecast, that sterling will be at $1.33 in a month's time, at $1.35 in six months and it will have jumped to $1.41 in a year. Last month the 12-month forecast was at $1.42 and in April (when the BoE was widely expected to raise interest rates in May) it was $1.44, the highest since the June 2016 Brexit referendum.

Expectations of rate hikes from the Bank of England also support the pound. It is widely forecast, that the UK central bank will raise interest rates by 25 basis points to 0.75% in August. The pound has risen by 0.3% against the US dollar today, putting the exchange rate at its best level since 23 May. The pound is currently worth around $1.34 level.