- Brexit delay could put further pressure on Sterling
- UK to remain in limbo until end of 2017
- European elections and lack of British planning cited as possible explanations
- City of London looks for swiss-style deal
- Could the Pound recover in the mean time?
UK not ready for Brexit negotiations
The Sunday times reported that article 50 was unlikely to be triggered early in 2017 because the situation in government was “chaotic”. The UK does not have the infrastructure for the people they need to hire, adding speculation that Brexit could be on the backburner for some time.
Whilst it is understandable that the UK want to be as prepared as possible for the negotiation table, Sterling remains in murky waters for an extended period of time.
That being said, there are opportunities for Sterling in the mean time, and this week’s retail sales shine some hope on the whole Brexit fiasco. If economic data continues to provide hope to the economy, we may see Sterling crawl back some of its recent losses against its major counterparts.
London seeks swiss-style deal
Representatives from the UK’s finance sector will meet next month to discuss post Brexit policy ideas with the Prime Minister Theresa May. The idea is that UK sectors that rely heavily on EU trade could secure bilateral agreements with the EU ensuring current arrangements are kept in tact. This could limit the economic damage of Brexit and install confidence in business that current trade arrangements will remain untouched.
A Swiss-style deal could limit the impact of Brexit but will likely take longer to negotiate. Bilateral agreements are bespoke agreements and require extensive ratification amongst the remaining 27 member states.
Could the Pound recover in the mean time?
With it looking less likely that Brexit will happen in the immediate future and the needs of those affected are being considered, there is an argument that Sterling may recover in the meantime. With the above in mind, confidence could begin to improve and coupled with positive economic data, may even u-turn before the official withdrawal – article 50. I would therefore be mindful of current economic releases, confidence surveys and inflationary figures for the next few months. If the climate continues its positive trend the BoE may hold off on further monetary intervention.