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Sterling softens on Brexit confusion, Dollar strength

13/06/2018

The House of Commons yesterday voted down proposals from the (unelected) Upper Chamber to dilute the UK Governments Brexit Bill to the point where the UK remains in the EU. Sterling, unsurprisingly, has weakened on the fudged outcome because the markets dislike uncertainty, and even after 102 weeks since the vote to leave the EU by the British people there’s nothing but uncertainty over the form of Brexit the UK Government will sign the country up to, despite the electorate being make a simple binary choice between two outcomes. Additionally here, there is uncertainty over Mrs May’s ability to cling on to power, and the writing is already on the wall. Even with the prospect of an FOMC meeting with a (future) US interest rate rise factored in Sterling is finding little comfort. The upside to this should be the capital inflows that stem from a more competitive exchange rate, but until the uncertainty is ended this will also be constricted. With a US rate rise factored in, and with Donald Trump’s apparent success at the Singapore summit with North Korea, we anticipate the demand for the dollar to stay strong.

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