What will happen to Sterling once we trigger Article 50
- Posted by currencies in Bank of England, Brexit, Currency, Dollar, Economy, EUR, GBP, Inflation, Prime Minister, Sterling, UK, Uncategorised
- March 28, 2017
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Sterling traded within a tight range today, outperforming other major peers against the dollar, apparently disregarding Britain’s looming formal launch of negotiations on leaving the European Union.
British Prime Minister Theresa May will trigger Article 50 of the EU constitution with a formal notification of Britain’s intent to leave the bloc tomorrow, kicking off a two-year period of exit talks.
Most analysts say the triggering of Article 50 will only have symbolic significance for investors, with the real driver for sterling being the EU’s response and the health of the British economy going forward.
“What many market participants may be underestimating is how difficult the negotiations would be … because the pound has been doing quite well recently and hasn’t been under pressure much since we got this news (date for Article 50 trigger).
Stronger than expected UK inflation and signs the Bank of England was edging towards raising interest rates have helped the pound over the past two weeks.
But uncertainty surrounding the terms of Britain’s exit from the EU continues to weigh on the currency, still down by nearly 20 percent since last June’s Brexit vote.
Will the pound really devalue tomorrow when we trigger? Analysts are split on this. Yes, it means for certain we are leaving; however, everyone knows this already so it is not shocking news.
Since Brexit these markets really do have a mind of their own, Sterling had gained when it has been expected to fall and vice versa, tomorrow really is 50/50 on how the market reacts.
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