Pound Sterling has recovered from its post-Brexit downslide, whilst it remains on the lower end of the scale it looks as though further losses, at least for now, are unlikely to continue. That being said as many are aware, the UK currently remains a member of the EU until the process of Article 50 is complete.
Theresa May has pledged her support for ‘Brexit means Brexit, but has not offered the public any indication as to when or what Brexit entails.
A number of angry Leave campaigners have expressed their disappointment in May’s delay in triggering Article 50, but there is an incredibly strong, tactical reason for doing so. Firstly, once the invocation of Article 50 occurs, the UK is on a countdown timer to negotiate the best deal possible from the EU.
Secondly, the UK is not prepared for negotiations, and thirdly, whilst the UK remains in limbo the impact on the economy is mitigated. Whilst uncertainty continues to surround the Brexit saga an official statement from government will only put pressure on an already difficult time for the UK.
Delaying of Article 50 could soften the economic impact
Whilst business confidence has taken a blow since the vote, a number of key economic releases have provided hope for a post-Brexit Britian. I am not expecting much downslide in economic releases until at least the end of the year.
It will take some time for economic data to spill into the economy, and whilst the UK remains in limbo the implications of Brexit will unlikely be felt fully until Article 50 is invoked and government are pressured to negotiate deals.
May can technically delay Article 50 for as long as necessary, and with a number of European elections next year she may want to tread carefully in terms of when.
Sterling could improve
If key economic data continues to shine in light of the EU referendum it’s plausible Sterling could continue to claw back its recent losses. As I am not expecting the impact of Brexit to hit the economy yet its likely further releases could paint a different picture to the doom and gloom messages seen during the referendum.
Whilst the UK remains in the EU Sterling has a safety net to fall back on. However once the triggering of Article 50 occurs I am expecting large falls in the Pound’s value again. This window of opportunity before government trigger Article 50 may work in your favour if you are buying foreign currency. Be mindful of any news that outlines a date for Article 50, this could be bad news for Pound Sterling.