Asset managers warn of possible further fall in Pound – The strength of the pound may be challenged more, as the outlook for the Brexit negotiations look anything but stable, according to Europe’s largest asset manager.
Didier Borowski, who heads up macroeconomic research at asset manager Amundi, has published a research note reminding us that the Brexit negotiations are “only just starting”. Borowski added that he considers the chances of a hard Brexit to be low, but that “no scenario can be ruled out” and that the future is still “very uncertain”.
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Uncertainty Remains
He said that even though he thinks the chances of a hard Brexit have fallen, “there is no scenario that can currently be ruled out” which in turn means that the pound’s path “is still very uncertain”. He took the opportunity to state that the chance of a further fall in the value of the pound is still a possibility. He asserted that he expects the UK and the EU to agree an arrangement whereby there is free trade in goods but only “partial passporting in financial services”.
He went on to explain that he believes a weaker pound will have a major impact on the strength of the UK economy in general. It will result in falling residential and business investment, for example.
Negotiations Key
The note from Borowski comes as the pound remains some 6 per cent down on the dollar when compared with its value before the Brexit vote in summer 2016. His point-of-view will carry some weight in light of the fact that Amundi manages around £1.2 trillion in assets.
Commenting on the Brexit negotiation process itself, Borowski added: “Bear in mind that trade negotiations are quite hard to settle.” Now, all eyes will be on the labour market report published in late February. Hopes that the Bank of England will increase interest rates in May could be dampened with the report showing a mixed set of employment figures.
Economists claim that investors are less confident about the Brexit negotiations than at the beginning of 2018, as doubt grows about the Prime Minister’s ability to secure a transition deal.