Brexit talks cause the Pound to suffer against its majors

 

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Pound tumbles after Theresa May’s interview yesterday

Brexit seems to be a disaster already even if the UK ‘still’ forms part the European Union.  On the day after the EU referendum, many Britons woke up with the ‘dream’ that the country will change overnight…..Britons should probably stop clinging on to this ‘dream.’ “Brexit means Brexit” and ”there will be no turning back,” said PM Theresa May in one of her recent interviews.

The British Pound resumed its downside momentum towards the end of last week with no reports available to support it. This has accelerated today after Theresa May’s comments over the weekend that there was no “taking bits of the EU,” as it leaves the bloc – implying a break from the customs union – which looks very much like a ‘’hard Brexit.’’

The currency markets are bearish which has caused the pound to trade at its lowest levels against its majors since 1985. The sterling’s recovery is now a myth as the disaster of Brexit begins to unfold.

Last week saw the British Pound appreciate due to December PMI readings printing better than expected. However, Sterling has now seen declines in excess of 1% falling through lows last seen in October of last year.

Let’s be clear about Brexit…

Well, there is nothing clear about the Brexit saga. No one knows how hard Brexit will end up being! No one knows the future of the Sterling! A weaker sterling will not attract UK tourists buying foreign currencies. It will rather cause a potential rise in inflation as imports eventually become more expensive.

Following criticism by the former EU ambassador Sir Ivan Rodgers, Prime Minister Theresa May indicated her approach to Brexit was not muddled. She stated “We are leaving. We are coming out. We are not going to be a member of the EU any longer”.

She also stated the government would be releasing more details in the coming weeks as they look ahead at triggering Article 50. When asked was Brexit a way to prioritise immigration issues in the UK. Theresa May answered that she was not treating it as a binary issue. “We will, outside the EU be able to take control of our immigration issues but we will also as part of that Brexit deal be working on getting the best possible trading relationship with the European union”.

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Nothing seems to have improved from 2016…there are of course a lot of problems with the Brexit idea. Companies dealing with currencies have to hedge and act smartly to avoid major losses. Britain now finds itself in an odd position and a weak sterling does not help…Analysts predict that the Pound will suffer more once Article 50 is triggered in March.

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