Now that the UK Government have highlighted a date for Article 50’s declaration, where will Pound Sterling exchange rates head next? The UK’s long awaited departure has been the topic of interest ever since Theresa May declared the end of March as her Brexit timetable.
Back in September when the news was announced, Sterling fell to the mid 1.10’s against the Euro and 1.21 against the US Dollar.
As the end of March looms and with one week before the UK begins the formal process of an EU-exit, the Pound has stood resilient against the new wave of uncertainty that’s set to follow, with GBP/EUR around 1.15 and GBP/USD even higher at 1.24 at the time of writing.
There is some supporter for the Pound, the latest string of economic data shows a defiant UK economy. Higher inflation may prompt the Bank of England to raise interest rates in the near term, and the weaker Pound whilst bad for consumer prices, has provided a glimpse of hope for UK exporters.
It may be some time before official negotiations begin between the UK and remaining EU members. Early talks look likely to centre around a Brexit bill worth €60bn, by which the UK could be asked to pay before official negotiations begin.
This could further delay the UK’s departure, especially as signs suggest the PM may reject any such bill. A number of Tory MP’s have pushed Theresa May to ‘stand firm’ against the bill, which could find its way in court adding further delays to Brexit negotiations.
European leaders likely to focus on elections
There is then the problem of timing, with the elections in France and Germany this year much of the focus has been elsewhere. On April 29th, EU leaders will hold a summit to discuss the next stages of the Brexit, and to encourage European leaders to get behind a common view on Brexit negotiations.
Sterling investors hoping for a quick and clean break may find themselves disappointed from the start, it could be summer before any such negotiations take form and this may only serve to weaken the Pound further.
The declaration of Article 50 may not hurt the Pound at first glance, but if any such delays take place in regards to negotiations, we could see another round of GBP weakness.