Big Money is avoiding the pound

Just when we thought that a deal between the European Union and Great Britain was in the making and thus avoiding a hard Brexit, another spanner was thrown in the works which saw the British pound come under pressure towards the end of last week.

The EU's chief Brexit negotiator Michel Barnier, at the beginning of last week noted that a mutually beneficial deals was in the best interests of both the EU and the UK which sent the pound rallying

But it seems like Mr Barnier did an about turn on the weekend by noting that the EU would stick to its `guns regarding EU regulations meaning the UK could not have it’s cake and eat it too.

He said that the EU had built up its regulations over many years and if countries were able to pick and choose which rules to abide by, it would be a free for all situation which would break the EU as a whole.

He said the UK was welcome to stay in the EU single market like some other Countries but they must follow the rules.

"They could stay in the single market, like Norway, which is also not a member of the EU - but they would then have to take over all the associated rules and contributions to European solidarity” Mr Barnier said

"But if we let the British pick the raisins out of our rules, that would have serious consequences. Then all sorts of other third countries could insist that we offer them the same benefits." He added.

This uncertainty is creating a volatile situation for the British pound and many investors are not prepared to take positions in the pound in the current environment and even some of the bigger players are preferring to sit on the sidelines and take a wait and see approach.

It’s very hard to invest when you have no more insight than anyone else regarding how the negotiation turns out,” said Paul Lambert, head of currency and portfolio management at Insight Investment.

 

 “You could guess and you might be right, but it would be little more than a guess.” He added.

 


Analyst

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