Political uncertainty & Brexit cause sterling weakness
The pound’s value is being predominantly dictated by Brexit. Over the past month sterling has gradually declined in value against the Swiss franc. There is potential for further falls for the pound due to the lack of clarity surrounding Brexit and the leadership battle for the new Conservative leader.
There are candidates for the role of Prime Minister who have stated they are willing to bring a no deal scenario back to the table in a bid to get a better deal from Brussels. A no deal scenario is the investor’s biggest fear and if the probability of a no deal increases you would expect the Sterling to weaken. The threat of Britain leaving the EU with no deal is the only ammunition the UK has in renegotiating the current deal on offer from Brussels.
Jean Claude Junker, European Commission President stated that ‘there will be no renegotiations as far as the content of the withdrawal agreement is concerned’.
CHF Benefits due to ‘Safe Haven’ status
The Swiss franc is currently proving popular among investors due to its reputation as a safe haven currency. Due to global economic uncertainty, predominantly created by the Trump administration’s trade wars investors are moving away from riskier commodity-based currencies in favour of safer currencies such as the Swiss franc or the US dollar.
I am afraid that we will need a firm leader in place and some clarity on Brexit in order to see a significant rally for sterling, until then I am of the opinion the pound will remain fragile.
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