The failure of the Brexit talks between the Government and Opposition late last week has led to a renewed possibility that very different events will unfold. That we get a new Conservative Prime Minister within weeks who is determined for a hard or no deal Brexit is almost a given. But can he or she force that through? No one is 100% sure, but a no deal Brexit is nevertheless a real possibility once again.
On the other hand, if they cannot get that through a General Election is a real possibility too. New Prime Ministers tend to get a bounce in the polls, and a risk-taker like Boris Johnson could easily leap at the opportunity. If he fails to win clearly and anti-Brexit parties like the Liberals or Scottish nationalists have any say in policy, another referendum rises in likelihood. Alternatively, a Marxist-led Labour government could be elected with a majority. What would happen then?
Economists would call this a “fat-tailed distribution”, where outlying possibilities are just as likely as a more mainstream resolution – Theresa May’s Withdrawal Agreement being passed in some form or another. No deal, no Brexit or a Brexit “fudge” are all evenly poised this morning, and the fate of the pound (at least in the medium term) hangs in the balance.
More immediately, the pound has had something of a “dead-cat bounce” this morning. Sterling has lost over 3% in the past two weeks, and we might have expected that to continue. This morning, however, the rate has recovered slightly.
Anything can bounce if it falls fast enough, and if you have a major purchase coming up you probably shouldn’t take too much comfort from it. Speak to your trader today on 020 7898 0541 to lock in a rate that will enable you to fulfil your plans.
