Sterling plummets following Article 50 announcement

UK Prime Minister Theresa May stated on Sunday that Article 50 would be invoked by the end of March 2017. Once the button has been pushed the process of exciting the EU can begin. Sterling has dropped significantly in value against all major currencies since the announcement. How long and how fruitful trade negotiations will be is very uncertain. The markets do not react well to uncertainty and this is the reason for the pound’s rapid decline.

Australia are one of the more forthcoming nations to get trade agreements in place, but even with a willing partner it is estimated the negotiations will take up to two-and-a-half years. It is expected that overall two thousand skilled negotiators will be needed to tie up all trade deals. Taking this on board I do not expect any quick, significant rallies for Sterling unless there are unexpected negative factors abroad.

New Chancellor of the Exchequer, Philip Hammond has stated that he feels the UK has been resilient following the vote to leave. He stated the UK economy has a strong backbone which will be tested in the coming months. I tend to agree, despite the fall in Sterling I think our economy is strong in comparison to other countries and although I think there could be worse in store for the pound there will be a recovery. It is a question of when and how quickly.

I think once Article 50 is triggered there will be an initial decline, but then we will see a slow, steady rally for the Pound as uncertainty is taken away from the markets.

If you have a requirement involving selling Sterling it is vital to get in touch with one of our experienced brokers. We can offer contract options which can protect you against the current volatility in the market and potentially maximise your return.

The UK could be set for a hard Brexit, which may have further ramifications for Sterling in the weeks and months ahead. Clients holding Sterling should consider getting in touch with us to discuss your options. Call our trading floor on 01494 725 353.

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