GBP is Due for Volatility as Brexit Negotiations Enter Final Stretch Next Year

The British pound is set for some major volatility at the start of next year due to ongoing Brexit negotiations, one currency expert told CNBC Tuesday.

The currency could see its value drop by as much as 10 percent if the U.K. does not reach an agreement with the European Union over its future trading arrangements, Thanos Vamvakidis, head of G-10 foreign exchange strategy at Bank of America Merrill Lynch, told CNBC’s “Squawk Box Europe.”

“If we don’t get a deal, sterling can be weaker by about 10 percent, (or) even lower. If you get a deal, any deal, …. (sterling) can be up by 10 percent. I don’t think any other currency can have this kind of moves in the next few months,” Vamvakidis added.

Brexit has been a key factor moving sterling since the referendum vote took place in June 2016. The currency is down about 13 percent since then. On Monday, the pound fell to an 11-month low against the dollar to $1.2920 amid growing concerns over Brexit and the risk that there won’t be a deal. The U.K.’s Trade Secretary Liam Fox said Monday that the European Union is stubborn, and the chances of a no-deal stand at 60 percent. At the same time, trade tensions supported the greenback, which also contributed to the 11-month low.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza