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You are here: Home / British Sterling / Brexit, false promises and the weaker Pound

Brexit, false promises and the weaker Pound

February 13, 2017 by Rob Lloyd

Brexit, false promises and the weaker Pound

After 8 long months the UK is preparing for its EU exit under Theresa May’s order which markets expect by late March. The Pound has faired well despite economic predictions of doom and gloom, as consumers and businesses alike ignore the implications of the vote in June last year.

But what has become clear in recent months, is that many if not all of the Leave campaign promises were nothing but lies, designed to play on the ordinary fears of the working class. The NHS system, which is on the brink of yet another crisis, will not form a vital part of Theresa May’s 12 step Brexit plan because the £350 million saved from EU membership is a complete myth.

And yet in a recent poll, if the EU Referendum was held today the result would likely tilt to the remain side. Perhaps another poll not indicative of results, or perhaps the public’s realisation that a fairy tale Brexit is looking less and less tenable.

It appears almost ironic that Brexit supporters voted to leave the EU on the assumption that ‘taking back control’ was a key element of the deal, and yet the UK public have, up to now, had little say on what shape Brexit will become.

Pound Sterling fears subside but for how long?

As we approach the expected deadline for Article 50, the Pound remains in more favourable ground compared with the lows witnessed after the Referendum. GBP/EUR hit 1.10 back in October and whilst these rates seem like a distant memory, they could quite easily come back to haunt at any moment.

When Theresa May revealed her Brexit strategy last month, it became clear that little lessons were learnt from the EU’s clear message. She remains under the false impression that the UK will have the best of both worlds, ie access to the single market and full control of British borders. This isn’t actually the problem, there are other countries such as Canada which hold a free trade agreement with the EU, without adhering to the principal of free movement of people.

The actual issue is whether any such deal can be completed within the framework of Article 50, which allows for two years of negotiations before the UK officially leaves the club.

Furthermore, the UK has a €60bn debt to pay before it leaves, which will only harden the EU’s stance towards the Government if it ops to ignore the bill.

Throw into the equation May’s allegiance with Mr Trump, and the impact an already weak Pound is having on consumer prices and you have a recipe for further Sterling losses. With the negotiations expected to be difficult there appears to be little room for Sterling strength which only leaves the UK, as a net importer, vulnerable to economic downturn.

If you are buying the Euro in the coming weeks, be aware that once the UK hands its notice of withdrawal, and the negotiations begin, there may be a dampened appetite towards the Pound as investors gauge which side holds the upper hand on negotiations.

Filed Under: British Sterling Tagged With: Article 50, Brexit, EU Referendum, Pound Sterling weakness

The information on this website is provided for information purposes only. It does not constitute advice to any person on any matter. Every reasonable effort is made to ensure that the information is accurate and complete but we assume no responsibility for and offer no warranty with regard to the same.

About Rob Lloyd

Robert brings with him a wealth of knowledge on what is impacting exchange rates, especially around the subject of the EU Referendum and the implications for Sterling and Euro exchange rates.

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