The pound could benefit from a relief rally – but little else has changed – as Theresa May is forced to concede a medium delay to Brexit, affirms the CEO of the world’s largest independent financial advisory organisation.
The message from deVere Group’s Nigel Green comes as officials in Brussels say EU leaders have agreed a delay to Brexit to 31 October along with a review in June.
Mr Green says:
“We can expect a relief rally of the pound, as investors digest the news that Brexit negotiations have longer to run, and the UK will not crash out of the EU on Friday, and the likelihood of a softer Brexit is significantly increased. A softer Brexit would be welcomed by businesses in the UK and those around the world that trade with Britain.”
Green said that investors are advised to now be on the watch for this relief rally in sterling, UK stocks, and also a mini spurt in economic activity in the UK, as delayed household and business spending takes place.
This medium extension period also makes a second referendum – a ‘confirmatory vote’ on any deal the Parliament finally agrees to – more likely, and with that a good chance of Brexit being voted down.
“The problem for traders and investors is that the extension to Oct 31st does not bring us any closer to a resolution,” said Neil Wilson, Chief Market Analyst at Markets.com “The cliff-edge has simply been pushed back. We are in a period of peak uncertainty for UK politics and that won’t help investors pile back into UK assets. We must anticipate Theresa May continuing to try to ram her deal home at whatever cost. If there is not enough time in this extension for a referendum or General Election, then it would seem altogether pointless. This delay does nothing to remove uncertainty, only prolong it, unless it allows enough space for ref2 and or GE.
Sterling traders remained cautious going into this morning’s trading session on the GBP/USD pair, which was bouncing between 1.3055 and 1.31185 although it was largely in the 1.3070 / 1.3100 range.
Nigel Green continues:
“This medium-length extension doesn’t change the fundamentals significantly. What businesses in the UK, the EU, and around the world that trade internationally need and want is decision, not further fudging. The best way to do this would be to put it back to the people in a second referendum.”
Brext ‘omnishambles’ has gone on long enough
In March, the deVere CEO said that allowing the public to vote and giving them a final say “is quite simply the only credible solution now available…From inaccurate and often misleading campaigns to ineffective negotiations, the Brexit omnishambles has gone on long enough.”
Green says he stands by this position following the outcome of the emergency Brexit summit in Brussels: “All the continuing uncertainty makes it essential for those who are serious about safeguarding, creating and growing their wealth to ensure that their portfolios are properly diversified. Diversification is the investor’s best weapon to mitigate risk and capitalise on the opportunities as they arise.”