Since the UK public decided a ‘Brexit’ was the best option for the UK, GBPEUR rates have fallen 15 cents making a €200,000 purchase £20,000 more expensive. However yesterday and this morning, the pound clawed back some losses due to the uncertainty being removed about the next UK Prime Minister.
Andrea Leadsom pulled her name out of the hat yesterday, which confirmed Theresa May will be the next Prime Minister. The next steps are for David Cameron to formally approach the Queen and give his recommendations. We expect this to occur tomorrow morning.
Theresa May did state before and after the referendum she would not trigger Article50 for at least a year but it will be interesting to see if she changes her tune. I am in no doubt the day Article50 is trigger the pound will lose value, when or should i say will this day ever come? I’m not convinced.
The soon to be new Prime Minister has made it clear with statements such as ‘Brexit means Brexit’ however I still think there will be further negotiations about EU membership.
Also yesterday the Eurogroup met in Brussels to discuss the repercussions of the Brexit on the EU. The general feel was a bullish tone however Italy’s banking sector still remains in the spotlight. The IMF have warned two decades of stagnant growth is now starting to hurt Italy and its appears a recession is just around the corner.
The next economic event to look out for is the UK interest rate decision on Thursday. Governor of the Bank of England Mark Carney has eluded to a potential cut to 0.25% however I think this will be a premature and hasty move. The Bank of England are better off waiting to see how the market reacts to Theresa May’s appointment in the upcoming weeks and then making decisions accordingly.
HOWEVER I still think you will see one or two members of the MPC vote to cut rates and therefore the pound will lose value.
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