Yesterday saw the pound to euro exchange rate fall but then swiftly climb again as Theresa May signed a letter delivered to European Council President Donald Tusk to start the official Brexit process.
The pound reached highs of £1 to €1.159 as Mr Tusk made a conciliatory speech after he had received the letter triggering Article 50.
However, the pound’s value against the euro continued to move swiftly throughout the day, and sterling is likely to remain volatile over the coming weeks and months as Brexit negotiations get underway.
Paresh Davdra, CEO and co-founder of RationalFX, said: “The pound has shown considerable fluctuations in the aftermath of the triggering of Article 50.
“As nerves mounted in the lead up to the historic moment, sterling confounded expectations and witnessed a brief rebound, initially jumping against the euro before dropping off to the original levels.
“However, after the initial excitement, the pound reverted to volatile behaviour reflecting the robust nature of challenges sterling now faces.”
He added: “Now that the Brexit process has commenced, key drivers likely to affect the pound moving forward would be the state of Brexit negotiations and the UK economy’s health.
“Only time will tell whether the highs and lows seen by the pound today will become familiar over the next two years, or if markets will see the pound rise in strength again.”
Currency experts are encouraging consumers to be more savvy about when they buy their euros in the midst of all this volatility.
“It’s now more important than ever that consumers are proactive when it comes to spending money overseas – whether it’s buying their travel money, buying a property abroad or other key life moments such as getting married or studying overseas,” said Ian Strafford-Taylor, CEO of FairFX.
“We are starting to see people becoming increasingly aware of currency and how much they get for their money abroad.
“Savvy consumers must monitor rates and act when the pound improves so they’re getting the most for their money – a free currency tracker will do this for you.
“You can also get more bang for your buck by considering alternative destinations where the pound is performing better and know the pitfalls to avoid when it comes to bad rates and hidden fees.”
Other exchange rate experts have suggested that it is only uncertainty that is holding back the pound, and that once the Brexit dust has settled, sterling may pull back.
Alastair Archbold, foreign exchange manager for Foremost Currency Group, said: “Much of the weakness in sterling over the last nine months has been down to uncertainty, and perhaps when negotiations begin and this fog of uncertainty begins to lift, the pound may recover further and eventually reach levels seen before the referendum, particularly if UK economic data continues to impress.
“There awaits a prolonged period of negotiations ahead however, and sterling is likely to remain volatile and susceptible to downward pressure in the short term.”
