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You are here: Home / British Sterling / The UK now has two options with Brexit

The UK now has two options with Brexit

October 14, 2016 by Rob Lloyd

The UK now has two options with Brexit

EU commission HeadquartersWith continuous pressure on European leaders to take the tough approach to Brexit, Donald Tusk – President of the EU Council may have drove a knife through the Brexit coffin yesterday.

‘Hard Brexit or No Brexit’, the famous words relayed yesterday by Donald Tusk as mounting pressure from European Leaders to take the tough approach to Brexit continues.

Mr Tusk will chair meetings with its remaining 27 members as they look to protect their best interests once Theresa May announces her formal departure from the bloc. He warned that the EU ‘would not compromise on its insistence that freedom of movement will be a condition for Britain’s access to the single market’. A message that Boris Johnson continues to insist would be a possibility.

His message echoes many other EU and European officials including German Chancellor Angela Merkel.

The EU is built on 4 fundamental principals which include free movement of people, as well as goods, services and capital. Donald Tusk has made clear that the UK will not be able to compromise on these four principals if it wishes to retain access to the single market.

The potential for a soft Brexit grows increasingly unlikely as remaining member states look to protect their interests, Norway has already shown discontent to the UK opting for EEA membership.

What next for Pound Sterling?

The UK will have a tough time when it comes to negotiations which will put further pressure on Sterling, whilst it remains unlikely that the UK will opt to remain a member of the EU, the potential for a hard Brexit puts the UK economy in deeper uncertainty with the likely return to WTO tariffs for some time.

The options for post-Brexit Britain are limited and Sterling could be set for further slides. With a hard-Brexit the likely outcome at this stage we could see GBP EUR exchange rates below 1:1 in 2017.

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

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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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