Pound in for more pain
Published on 28.12.2018 20:08

With all the uncertainty surrounding the UK at the moment such as political instability as well as the current Brexit negotiations that seem to be dragging on forever, many are starting to wonder why the British pound isn’t much lower considering all the uncertainty
A challenge to British Prime Minister Theresa Mays leadership was scuttled and she is able to stay on for now but some say it is only a matter of time before she is finally ousted.
There is expectations that the Bank of England may start hiking rates once this Brexit mess is over but some say that is not true.
One analyst believes that the market has got it all wrong and the BOE will have no choice but to leave rates on hold out of fear of derailing the economy even further and the first rate hike may not come until 2020.
If the central bank does leave rates on hold as we enter 2019 the pound sterling is bound to take a big hit.
"The market thinks the Bank of England will hike, We think that is wrong. In this uncertain environment with potentially a fall in the government, we don't think the Bank of England can hike rates." Said Alberto Gallo, a portfolio manager at Algebris Investments
"We think the Bank of England could go on hold rather like the European Central Bank has done, rather than continuing to hike one or two times over the next two years," he says. He added.
The deadline for Brexit is fast approaching, and we now have less than 90 day when the UK is supposed to leave the EU. The chances are now that this might be delayed which will only create more uncertainty for the British currency.


Andrew Masters

Analyst

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