Financial markets clearly did not like what they saw coming out of the UK on the Brexit front yesterday.
The Irish Stock Exchange experienced its biggest fall in well over two years, while the British pound weakened significantly against the euro.
This led to a warning last night from Irish exporters that many of its members only have plans in place to see them through the first six months of a no-deal scenario.
John Finn, Managing Director of Treasury Solutions and a founding member of the Treasury Hub, works with companies on their currency strategies. He said the current volatility on the currency markets is “as simple as deal, no deal or risk on, risk off”.
He said a deal brings more certainty and “is probably good for the economy in the UK” while a no-deal scenario “would be a disaster”.
If the market believes that a no-deal is more likely, “then it is selling sterling, which means it’s weakening, which is bad news for exporters, ” according to Mr Finn.
He pointed out that “at the start of yesterday morning if you had 100,000 sterling in sales it would have been worth around €115,000 – at the end of the day they were worth just under €113,000”.
He said that’s “the extent of how impactful these moves are”.
On the path of the pound in the near-term, Mr Finn said “from the start of quarter three last year, it’s in quite a wide range of between 85p and 90.5p and it’s pretty much traded in that range for quite some time”.
If there’s more bad news, he said “you’d expect it to trade up towards the 90p level”.