Sterling and a “cliff-edge” Brexit

Commenting on Sterling’s gains following reports that a “cliff-edge” Brexit will be prevented, Andy Scott, Associate Director at JCRA, the independent financial risk management consultancy, said: “Sterling has jumped by one percentage point against its major counterparts on the back of reports that Theresa May will rule out a no-deal Brexit.

“The PM has opted to take a no-deal Brexit off the table, rather than have MPs take control of the situation if she is unable to get a deal through parliament by March 13th. An extension to Article 50 avoids a chaotic no-deal Brexit and that is creating a sense of relief within the market, driving Sterling to its highest level versus the Euro since the summer of 2017 (1.1640). With the worst-case scenario to be eliminated, the overall risk of Brexit would be significantly reduced and we can expect further gains for Sterling.

“Having spoken with clients across different sectors recently, there has been a reluctance to commit new capital or engage in deal discussions in case of a significant market event on March 29th. While there is still uncertainty over what the final outcome of Brexit will be, we expect investors will begin looking more favourably towards UK assets, especially with an undervalued Pound. If the market starts to view Brexit as having only limited economic impact, we would expect to see Sterling recover further in the months ahead.”