The pound is having a busy Brexit day.
Having tumbled around 0.35 per cent at the start of European trading on Wednesday, sterling has lifted off its daily lows in the last half an hour – climbing from $1.2405 to $1.2459 to trade broadly flat on the day.
The currency is jumping around as the UK’s EU ambassador is in Brussels to formally hand over Britain’s notification of exit after 43 years of membership.
Triggering Article 50 will kick start at least two years of negotiations over Britain’s exit bill, trade terms, and the role of European courts in the constitution and any possible transition arrangements. Here’s the FT’s Roger Blitz’s take on how sterling’s dynamics could act a gauge for market sentiment during the talks.
Derek Halpenny, European head of global markets research at MUFG thinks the lack of major Brexit developments over the coming weeks should help support the pound.
“Once today’s event has passed there will not be much for speculators to trade off for perhaps up to six weeks”, said Mr Halpenny.
Julius Baer is not so sure. Markus Allenspach, head of fixed income research notes:
The exit process will start today and will give the EU27 and the UK government two years’ time to separate. EU representatives have made it clear in recent weeks that the UK will lose access to the common market as a result of the process, and that any negotiations of a new arrangement will only start after the divorce process has been completed.
Against this background, our economists maintain their view that the UK economy is set to slow considerably this year. Given that the UK retail price index gained 3.2% in the year to February, the economic slowdown puts the Bank of England in a challenging position, to say the least. We maintain our negative view on the British pound.