Everyone's a currency trader now as Brexit looms

Saying it loud and clear with an anti-Brexit banner on Westminster Bridge, in central London. The sterling's slump to a nine-month low in recent days on growing concern over the prospect of a cliff-edge Brexit is pushing up costs for Britons going ab
Saying it loud and clear with an anti-Brexit banner on Westminster Bridge, in central London. The sterling's slump to a nine-month low in recent days on growing concern over the prospect of a cliff-edge Brexit is pushing up costs for Britons going abroad. The main beneficiaries so far are those who want to travel to Britain, and Europeans with debts in pounds.PHOTO: REUTERS

LONDON • The pound's weakness is turning everyone - from students to holidaymakers - into unwitting currency traders as Brexit nears.

Mr Adam O'Conghaile owed £36,000 (S$63,000) to the United Kingdom government when he graduated from the University of Cambridge in 2016 and returned home to Ireland.

Then Britain decided to leave the European Union (EU) and sterling tumbled, cutting the value of his debt in euros. "I'm certainly benefiting from the weakening pound at the moment, while I'm earning and saving in euros," said the 24-year-old.

"I made my first large payment of a few thousand pounds immediately after the Brexit vote, followed by another in the summer of 2017." He is planning a third before Britain exits.

Sterling touched a nine-month low in recent days on growing concern over the prospect of a cliff-edge Brexit.

International Trade Secretary Liam Fox stoked those fears when he put the risk of leaving the EU without an accord as high as 60 per cent.

Some dismissed his remarks as negotiating bluster, but even Bank of England governor Mark Carney said the chances of a no-deal Brexit are "uncomfortably high".

UNCERTAINTY

It's hard to project the future of my business, both in the long and short terms, when there is so much uncertainty regarding currency.

MR JACK BENDA, a London resident who founded a public relations business, Nostra Comms, earlier this year.

What has been a blessing for Mr O'Conghaile has been a costly aggravation for those in Britain looking to travel to the continent, or pay off debts abroad.

October and November will be a crucial period, as investors, business executives and consumers alike wait to see whether the UK and EU can reach an accord.

In a no-deal scenario, the pound could sell off quickly, said Mr Stuart Bennett, head of G10-foreign-exchange strategy at Banco Santander in London.

"The consensus seems to be that there will be a deal, which would make no deal more of a shock."

The pound's weakness is also complicating life for Britons with European clients. Mr Jack Benda lives in London, where he founded a public relations business, Nostra Comms, earlier this year.

While a weaker pound could make his services cheaper for European clients, the volatility has made international companies more wary of the UK and increased the costs of business travel on the continent, he said. "It's hard to project the future of my business, both in the long and short terms, when there is so much uncertainty regarding currency," Mr Benda said.

For now, the main beneficiaries are those who want to travel to Britain. "We will make a new high in euro-sterling at some point," said Mr Kit Juckes, a strategist at Societe Generale in London, in an interview with Bloomberg Television. "We will have tourists all over this town."

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on August 13, 2018, with the headline 'Everyone's a currency trader now as Brexit looms'. Print Edition | Subscribe