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Sterling Continues To Devalue – Big Few Days Coming Up

• Posted by Shyam Gokani in Uncategorised
• January 16, 2017
• No Comments

Britain’s pound fell sharply this morning as concern mounted that the country was heading for a “hard” Brexit from the European Union and its single market, a day before a speech by Prime Minister Theresa May on the government’s plans.

Some British newspapers have billed May’s speech on Tuesday as laying out potential major changes to its preferential single market access and hardening its stance towards an economic bloc that accounts for roughly half its exports and imports.

It’s clear that sterling is still very vulnerable to ‘hard’ Brexit fears, we think perhaps that’s one of the reasons for Theresa May’s speech on Tuesday, to provide a little bit of clarification.

With May expected to trigger Article 50 in March, which will start formal EU separation proceedings, the stakes are already rising.

British finance minister Phillip Hammond also gave a thinly veiled warning in a German newspaper interview at the weekend that Britain could use corporate tax as a form of leverage in Brexit negotiations.

If we have no access to the European market, if we are closed off, if Britain were to leave the European Union without an agreement on market access, then we could suffer from economic damage at least in the short term.

Later today, Bank of England Governor Mark Carney, who has delivered a string of warnings about the potential impact of Brexit, will give a speech at the London School of Economics on the policy issues affecting the bank.

The central bank cut British interest rates to a record low and pumped fresh stimulus into the economy shortly after the Brexit vote, but it is now seeing inflation accelerate as a result of sterling’s slide.

These next two days will be key to the sterling value, if as expected the PM continues her stance on a “hard Brexit” we could see the pound devalue further across the board.