Bercow’s Meaningful Vote refusal won’t impact Sterling, but it does heighten uncertainty
Although Sterling remained largely unmoved, John Bercow’s refusal on Monday to allow a Meaningful Vote on the new Brexit deal will place further downward pressure on the UK economy.
Sterling experienced a minor downside knock following the decision by the Speaker of the House of Commons, but there was no big surprise.
This highlights that traders are patiently biding their time as they forecast the European Union will allow a Brexit extension in the coming days.
As such, when this happens, it can be expected the pound will undergo a more significant rally.
Furthermore, and as I was quoted by The Times, The Independent and The Mirror, amongst other media, I reinforce my prediction that should the PM’s deal be approved, it can be expected that there will be a steep jump in the pound.
It would likely reach at least $1.35 as the prospect of a no deal and/or months of further uncertainty come to an end.
In addition, sentiment towards UK stocks would also pick up, especially when taking into account the attractive valuations of a large number of British firms.
Although Sterling has not really moved, Bercow’s decision could lead to further damage to Britain’s economy as the uncertainty and disruption show no signs of abating.
Wealth, jobs and businesses, not just in Britain but overseas as well, are in great need of certainty.
The uncertainty over Brexit has seriously impacted investment and confidence in the UK, with the country losing out on three and a half years of missed opportunity and ten of billions of pounds.
Even if the uncertainty comes to an end now, it could take Britain over 10 years to fully recover.
This is because the UK is losing grip of its edge in a fiercely competitive global economy due to the Brexit impasse. The country’s underperformance against its peers is likely to continue for years.
Furthermore, the risk of a no-deal Brexit still exists, as the EU may not approve an extension and parliament has not agreed the deal on the table.
As such, although Sterling has not been majorly impacted by Bercow rebuffing a Meaningful Vote, the wider economy will be affected because of the continual uncertainty it generates.
Consequently, it comes as little surprise that UK and global investors in UK assets are reacting to this ongoing Brexit-fuelled uncertainty by contemplating moving their wealth out of the UK.