The pound is taking a tumble this morning after politicians on Monday night paved the way for Article 50 to be triggered this month, leading analysts to warn that Brexit was still not priced in to the value of the UK currency.
Sterling fell as much as 0.9 per cent in Tuesday morning trading to trade just above $1.21 against the dollar, its weakest level since prime minister Theresa May promised a parliamentary vote on a Brexit deal eight weeks ago.
On Monday night, MPs struck down two amendments to the Article 50 bill made by the House of Lords in recent weeks. The peers then voted to overturn their own amendments, clearing the way for the prime minister to take the next step in the UK’s move towards leaving the EU.
Article 50 – the formal notification the UK must make of its intention to withdraw from the European Union – is now expected to be triggered in the final week of March.
Meanwhile, Scottish first minister Nicola Sturgeon confirmed on Monday that she would seek legal authority to hold a second referendum on Scottish independence as early as next year amid concerns over the impact of Brexit on the Scottish economy.
Commenting on the fall in the pound on Tuesday morning, foreign exchange analysts argued that the full impact of Brexit had still not been priced into the currency, which has already lost nearly 20 per cent of its value against the dollar since the referendum in June last year.
“News that there is little impediment to PM May and the Brexit button is weighing heavily on the pound this morning,” noted Jane Foley, foreign exchange strategist at Rabobank.
George Saravelos, currency strategist at Deutsche Bank, said:
I think the market is slowly starting to realize that Brexit is anything but priced in. How can you ‘price in’ an event of incredible complexity that has never happened before? We remain very bearish on the pound – our forecast is for a move close to $1.05.
Simon Derrick, an analyst at BNY Mellon, added:”The move today could be an early warning of what could happen when we do trigger Article 50″.