In an interview with Sky last Sunday, the Prime Minister stated that Britain would not be keeping “bits of EU membership,” reiterating that she would prioritise border control over access to the single market.
Although May went on to criticise the media’s assumption that she was leaning toward an “absolutely inevitable … hard Brexit” during a meeting in central London on Monday, her remarks had already sufficiently spooked markets.
Againt both the euro and the US dollar, sterling was down 1.3% on Monday, despite May’s efforts to distance herself from a hard-Brexit like position.
The pound opened at $1.227 on Monday and continued fluctuating throughout the day, closing at $1.216. Sterling’s descent carried on into the next day and was around $1.215, at the time of writing.
Relative to the euro, sterling moved from €1.151 to €1.415 by Tuesday morning, levels not seen since early November.
However, Brewin Dolphin’s head of research Guy Foster does not view the latest Brexit-triggered fall in sterling as anything out of the ordinary
“With the outlook for interest rates pretty static in the UK, the valuation of the currency is looking quite fair to us,” said Foster.
“While you will get small bounces whenever soft Brexit-type comments are made, conversely you will get small sell-offs when hard Brexit assertions are reiterated.
“Ultimately, markets are going to be focusing on the fact that we will be submitting Article 50 later in the year, at which point, negotiations will start in earnest. Until then, the currency is probably range-bound,” he asserted.
And though many are calling the UK uninvestable because of the Brexit-related uncertainty that is wreaking havoc on the pound, BMO Global Asset Management co-head Gary Potter says that is all the more reason for investors to consider the UK.
On the back of sterling’s weak performance, the FTSE 100 set another record high on Monday, smashing the 7,234.6 mark.
