Brexit guessing game to continue weighing on GBP in 1H17 - ING
|Viraj Patel, Foreign Exchange Strategist at ING, views that GBP price action since Brexit has been reflective of some weighted distribution of the various endgame outcomes, with the probabilities shifting as developments unfold.
Key Quotes
“While this has led to near-term volatility, we believe the broader risks to GBP continue to lie to the downside – at least until the tail-risk of a ‘messy divorce’ has been taken off the table. With the UK government looking to keep their negotiating cards close to their chest post the triggering of Article 50 (still expected by the end of March 2017), we suspect the guessing game in markets may continue for a bit longer. GBP is likely to bear the brunt of this lack of political transparency, while further uncertainty over the UK’s eventual degree of access to the EU single market could see the emergence of new unaccounted risks:
- Domestic political risks: Risks of an early general election to linger as UK politicians remain split on the optimal Brexit strategy. Calls for a second Scottish independence referendum would gather momentum if substantial single market access is conceded.
- External stability risks: Ongoing uncertainty may not only see a slowdown in inward FDI flows, but a possible reversal of capital flows that would derail UK asset markets.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.