A path to parity page 1

A path to parity?

The Pound is weak. Since the UK’s vote to leave the EU end-June, Sterling is over 17% lower versus the US Dollar and a fall of 14% means it is nearing parity with the Euro. That’s right, £1 may soon get you just €1, and it could fall further according to some analyst predictions. The most extreme of which suggest that GBP/USD could edge further towards parity before the end of the year.

We’re at a crossroads, with the jury still out on where the Pound is headed.

How much will your next holiday cost?

What does this mean for you? If you’re a business owner, the chances are you may be finding prices from your supply chain have suddenly increased. Alternatively, as a consumer this may only be coming apparent to you in the last week following the ‘Marmitegate’ dispute between Tesco and Unilever. However, this might only be the beginning of similar arguments that lead to your weekly shop costing much more in the near future.

More immediately, the cost of that foreign holiday to the European continent or beyond is now almost 20% more expensive than it was a year ago. Travel, hotels, eating out: all of these will cost a pretty penny more than before. Furthermore, the pound would have to rally 25% simply to put you breakeven.

What can you do to turn Sterling weakness into a profitable opportunity? Accendo Markets offers a range of Foreign Exchange (FX) opportunities for you to benefit from movements in the Pound.

In this report, we’ll provide you with three options in which you could benefit from Pound Sterling movements in either direction in relation to its peers: speculatively trading FX rates, physically trading FX and trading FX-sensitive stocks.

Taking a Pound-ing

It began with Brexit. On the day that Britain voted to leave the EU, the UK’s currency took an almighty hit; GBP fell 5% against its European counterpart, the Euro, and lost an even greater 8% against global reserve currency the US Dollar.

More recently, comments from new Prime Minister Theresa May hinting at a so-called ‘hard’ Brexit – a total split from the EU – sent Sterling towards all-time lows when compared to a trade-weighted basket of other currencies after a ‘flash crash’ on October 7, where the £1 traded at €1.10 and $1.12 momentarily. Recent legal developments have suggested that a Parliamentary vote may be required to approve the final terms of the UK’s EU exit, helping the Pound to rally back from its lows.

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This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.

Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance. Prepared by Michael van Dulken, Head of Research

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