Pound Sterling before Article 50 is invoked

Another year, another dry January and inevitably another roller coaster for Sterling exchange rates as 2017 looks firmly set to be the year of politics. Six months on from the vote to leave the EU on the 23rd June 2016 and not that much has changed to date, bar a significantly weaker Pound and absurdly expensive properties in London falling in value. The House of Commons returns 9th January after the Christmas recess and political developments surrounding Brexit will once again be the key driver for the Pound as we approach 31st March.

The date by which Theresa May has stated she wishes to formally give notice that Britain will be leaving the EU.

Supreme Court Ruling to give new Direction for the Pound

Although no official date has been given, this week or next may well see the Supreme Court ruling on whether the British government must consult parliament before invoking Article 50, the mechanism to leave the EU. Should Theresa May lose this appeal then the Pound in my view is likely to find support with gains to be expected. If however she does win the appeal, which cannot be ruled out, then sterling is likely to see a sharp fall as the prospect of a hard Brexit could become reality putting pressure on the Pound as we saw in the Autumn of 2016.

Whatever the outcome it would also open up the possibility that the case could then be referred to the European Court of Justice (ECJ) in Luxembourg, the highest court in the land. This scenario would be politically explosive though and the government for one has signalled that it would not look to go down this route should it lose at the Supreme Court.

It’s not just the Supreme Court ruling which is going to be topical in the coming months though. Talk of a second referendum on EU membership, the possibility of yet another referendum for Scotland, more Brexit related court cases, extension agreements going beyond the two year Article 50 limit or even a UK general election are all still possible outcomes which would all point to very different projections for the price of Sterling. A general election if called would see major uncertainty and substantial market movement for the Pound.

The year commences with UK Manufacturing numbers from the Purchasing Managers Index (PMI) released this morning which has shown the sector expanding relatively well in recent months.

Tomorrow sees construction numbers as well as housing data from Nationwide and official mortgage numbers from the Bank of England which should give us some clues as to how well the British property market is faring and its outlook for 2017.

Thank you for reading my first Pound Sterling report of the year. If you have an outstanding currency transfer that youd like to discuss, a number of key events early in the year could shape Sterlings direction. Call our team on 01494 725 353 or by emailing me at jll@currencies.co.uk.

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