Monday, 27 March 2017

How could article 50 affect the Pound?

This week Theresa May will formally begin the process of the UK leaving the EU when she invokes article 50 on Wednesday, but how will the currency markets react when it happens?

The Pound is actually performing very well at the moment, following robust retail sales figures and inflation numbers that suggest the Bank of England may have to raise interest rates later this year. The current Pound/Euro exchange rate is the highest it's been since about the 5th of March.

It's very hard to know how the market will react in 2 days time when article 50 is triggered. It's certainly not going to come as a surprise and for the most part, it could already be priced into the value of the Pound, and if that's the case we may not see any movement at all. However last Monday when Theresa May announced the date Art 50 would be triggered, the Pound fell about a cent against the Euro. That wasn't really a surprise either, but the Pound fell anyway. There is certainly a good chance the Pound may fall a little on the news as investors sell off the Pound. If you are worried about rates dropping, then get in touch to find out how you can protect yourself against a fall in rates.

What else is happening this week?


It's a quiet start to the week, and I think markets will mostly be waiting to see what happens on Wednesday when the Brexit process begins. That's also the day we see the first UK economic data of the week: Consumer Credit and Mortgage approvals.  We also have consumer confidence figures on Thursday and GDP figures on Friday. I expect a very volatile period for the latter part of the week for Sterling crosses.

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