UK: Pound less volatile to the political swings of Brexit – MUFG

Derek Halpenny, European Head of GMR at MUFG, suggests that the Brexit remains a dominant theme for the direction of the pound and it looks like the continued surprising strength of the economy is helping counter Brexit uncertainty, leaving the pound more stable.

Key Quotes

“That might still give way temporarily at some point with Theresa May set to give a speech this month outlining details of Brexit plans. The necessity of that speech is increasing with May coming under increased pressure to reveal more about the government’s plans. The Economist magazine will run a front cover with the caption “Theresa Maybe” criticising the lack of clarity in government strategy. This comes of course in the week when Ivan Rogers, the EU Ambassador quit.”

“Our sense at this point is that remaining in the Single Market is becoming less likely. Is that the simple definition of “Hard Brexit”? We don’t think so. What is now perhaps the most important element about the impact on the UK economy from the change in relationship with the EU is the transitional aspect to the deal. The UK is likely to be tied to the EU for a lot longer than two years and our sense is the upcoming speech by PM May will focus more on relaying this transition aspect to a deal. The longer the transition, the less concerned markets should be over negative implications, which should help support the pound.”