Get your dollars for next summer now: Sterling could fall further if hard Brexit continues

 
Natasha Clark
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Could the pound drop further as political instability continues? (Source: Getty)

The pound may have already fallen to a 31-year low against the dollar but there is a risk it could continue to drop if concerns over the government's plans for Brexit carry on.

New analysis from UBS suggested that if the economy begins to recover from the shock of Brexit, sterling could improve against the dollar, up to $1.36 in the next 12 months.

But if the concerns over the government's Brexit deal continue to have an influence on the markets, it predicts that the pound could fall as low as $1.10 against the dollar.

Quick, get those dollars in for next year, now.

UBS said that it does expect the pound to recover accordingly, but that politics has had a big impact on the currency thus far, and it was likely to continue to.

Read more: Sterling malaise leads to Microsoft increasing enterprise prices

It added that the weaker pound was having an effect on consumer resilience, and the current account deficit.

"A weaker currency leads to rising prices, and it is households who will feel the pinch if higher inflation eats into incomes," Geoffrey Yu, head of the UK investment office at UBS Wealth Management, said.

The pound continued to tumble yesterday before Mark Carney, the governor of the Bank of England, appeared at a Lords committee.

Yu added:

We expect the UK economy to bear the brunt of Brexit uncertainty in the coming months, levelling out as we move further into next year. Though the pound should recover accordingly, we cannot underestimate the central role that politics has played in sterling’s fate up until now. With the terms and conditions of the UK’s future trade links still unclear it is too early to rule out further downside risks in sterling.

Read more: Tesco chairman admits prices WILL rise due to weak pound

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