So how long can the Pound maintain its current levels? It’s fair to say that markets have likely priced in Article 50 in March, but the real challenges for the UK now await at the negotiation table.
Government’s approach makes it hard for Sterling strength
The big concern for the UK is not the Brexit itself, but the type of Brexit that Theresa May has set out to achieve. It has been suggested that immigration control will be top of the Government’s priority list, a decision that could cost the UK access to the single market.
Furthermore, May has made clear that the UK will not accept a bad deal from the EU, and will look to remove itself entirely from the single market if the remaining members play hardball.
As it stands, a large number of remaining members are united in their position of preserving EU principals, and the wreckless approach from the UK Government is unlikely to raise spirits.
There are many potential outcomes to the UK’s exit from the EU, and very few offer a better deal currently in place. The better of the choices centres around a free trade agreement, similarly to CETA – The EU-Canadian deal. Whilst this option offers an alternative to the status quo and allows the UK to restrict free movement, such a deal could take years to negotiate from both sides.
Alternatives such as the Norway model (EEA membership), may allow the UK access to the single market but will remain governed by the ECJ (European Court of Justice).
If logic prevails, both sides will work together to achieve a deal that works for all.
In terms of Sterling strength. we may have to wait until negotiations take place before we make further forecasts, but in my view the Pound may have further to fall.