Sterling and UK assets could decline further on Tory leadership contenders’ lack of Brexit plan

As the Tory leadership race is about to come down to the final two contenders, the pound and UK assets can be expected to fall further.

With Rory Stewart knocked out of the contest in the third round yesterday, the final four – Boris Johnson, Jeremy Hunt, Michael Gove and Sajid Javid – will be whittled down to three in a secret ballot later today.

There will then be an additional vote to select the final two, one of whom will be chosen as leader, and of course PM, by party members.

Unsurprisingly, Brexit continues to dominate the agenda as the race enters its final stages.

The ongoing chaos and uncertainty fuelled by Brexit, which has been heightened by the Tory leadership contest, has put sterling on a sharp downward trajectory.

Since the beginning of May, the pound has lost around 5 per cent of its value against the U.S. dollar. Furthermore, it continues six straight weeks of declines against the euro.

The debate between the Tory leadership candidates earlier this week, which was the first in which frontrunner Boris Johnson took part in, underscored there is no one, realistic way out of the Brexit quandary.

Indeed, not one of the contenders could answer how they would get their version of Brexit through.

Right now, as it stands, parliament will not endorse the deal as agreed with the European Union; nor will it back a no-deal scenario; and it will not support a second referendum.

Therefore, there is no clear path through the Brexit deadlock, which the past three years have shown.

As the uncertainty intensifies, and the October 31 deadline gets ever closer, the pound and UK assets will likely fall further.

Consequently, it is not at all a surprise that UK and international investors are reacting to the Brexit-driven uncertainties by contemplating moving their wealth from the UK.
No real answers from any of the remaining Tory leadership contenders in regard to Brexit will undoubtedly impact the pound and UK assets.

Indeed, nothing has already been priced-in because, at this time, there is nothing to price-in.

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