British pound rebounds after election shock, Brexit concerns grow
Tightening polls ahead of June 8 vote led to a dip in the pound, though the sterling regained losses against the dollar
The British pound fell as much as 0.7% on Wednesday against the dollar, following the release of a poll showing Prime Minister Theresa May losing ground ahead of June 8 elections. The pound recouped its losses, with most observers still expecting May’s conservative party will win a majority in Parliament.
Some are nonetheless bullish on the euro against the pound:
“The importance of politics as a market driver currently can’t be overstated,” Kit Juckes at Société Générale was quoted by FT as saying. “We’re supposed to treat polls with suspicion but needless to say, we remain bullish on the euro against the pound.
Hung parliament good for UK?
Jumping on the YouGov poll, which sports a high margin of error and contradicts all other polls, CNN Money was excited about what it might mean for Britain:
“Here’s one way to explain the reaction: A clear victory for May would preserve the political status quo including the risk of a very messy divorce from the European Union.
But a hung parliament — where no party has a majority — could force British politicians to compromise on Brexit and lead to a less painful exit from the EU.
‘All hell could break loose metaphorically speaking, at least at first,’ said Kallum Pickering, an economist at Berenberg Bank. ‘However, if a hung parliament forced a cross-party compromise it could lead to a softer Brexit strategy, and may turn out to be positive in the long run.’”
The messy divorce feared by many, and foreshadowed by bickering after the first Brexit meeting, may prove to be very painful, as was highlighted in a flurry of news on Wednesday. For one, Britain’s largest asset managers have been asked to provide detailed Brexit plans as concerns grow about what impact the change will have on London.
But the move touches everything. FT research found that 759 treaties will have to be renegotiated with 168 countries upon exit:
“Forty-six years on, when Britain leaves the EU in 2019, the UK stands to lose far more than it brought over to Brussels that day. The treaty chest has swollen into a small archive of EU agreements, running to hundreds of thousands of pages and spanning 168 non-EU countries. Within them are covered almost every external function of a modern economy, from flying planes to America and trading sows with Iceland to fishing in far-flung seas.
On Brexit day, that will all fall away. By law Britain will overnight be excluded from those EU arrangements with ‘third countries’, entering the equivalent of a legal void in key parts of its external commercial relations. Some British officials are even peering into the pre-1973 chest again to see whether some seemingly obsolete treaties might gain a new lease of life from a disorderly Brexit. ‘It is dusty in there,’ jokes one Whitehall official.”