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How will the invocation of Article 50 impact Sterling? (Daniel Johnson)
Theresa May has stated Article 50 is to be triggered on Wednesday 29th March. Popular belief is that Sterling will fall in value following invocation, I however am going against the grain. The market moves on rumour as well as fact and I am of the opinion that the triggering of Article 50 is already factored into current levels. It is common knowledge that Article 50 will be triggered and now we also have a date, it will not be a shock when the event occurs.
The market reacts badly to uncertainty, with Article 50 being triggered it adds certainty to the future of the UK economy and I would expect the pound to rally, but I would not expect gains to be significant. Trade negotiations will be slow and laborious, but as they become more apparent Sterling will strengthen. I would not expect huge gains however, it will be a slow, steady improvement.
Morgan Stanley analysts have stated “The pound is the most undervalued currency in the world and will return to pre-Brexit levels.”
No doubt there will be big swings during trading on the day of invocation. There are many investors sitting on seven figure sums waiting in hope of movement in their favour after Article 50 is triggered. With so many substantial trades going through, expect high levels of volatility on the exchange.
If I was a Euro seller I would consider taking advantage of current levels, with Greek debt, Italian banks bad loans to the tune of €360bn and three general elections within the bloc I expect the Euro to have a rough year. Political uncertainty is known to weaken the currency in question and with the distinct possibility that a far right party could gain power in both the French and German elections there is the strong possibility of a referendum. We have already witnessed the effect that can have on the value of currency.
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Thank you for reading.
Source: http://www.poundsterlingforecast.com/2017/03/21/how-will-the-invocation-of-article-50-impact-sterling-daniel-johnson/
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