News that the UK’s Prime Minister, Theresa May will begin the process of initiating the UK’s separation from the EU in the early months of 2017 has sent the Pound steeply lower today.
The Prime Ministers announcement that she plans to invoke Article 50 earlier that many had hopes came out over the weekend, and the Sterling weakness has gradually picked up throughout the day with the GBP/EUR pair significantly hitting a new 52 week low, which is also an almost 3 and a half year low.
Personally I think that today’s sell-off could have been worse had the markets not already been warned about this move by Theresa May. The Pound was sold off within the last 2 weeks when Boris Johnson suggested that Article 50 would be triggered around the beginning of next year, and I think this has softened the blow.
Interestingly there was some positive economic data released from within the UK which has perhaps softened the blow for the Pound today as well. This morning Manufacturing PMI figures were released which provide us with an overview of sentiment/business expectations within the Manufacturing in the UK and the figure came out positively and well above market expectations.
Despite this release, the Pound is still weak which I think offers us an indication of GBP’s likely movements in future. If economic data is beating expectations yet the Pound is still falling, negative sentiment may well continue to weaken GBP exchange rates.
It’s also worth noting that Credit Suisse this weekend highlighted a 1.10 price target in the following few months for the pair.
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