LONDON — The pound was relatively flat against major currencies on Thursday morning, after Article 50 was triggered on Wednesday lunchtime, making small losses against the dollar and small gains against the euro in early hours trading.
The pound is down 0.02% against the dollar to $US1.2433 at 7.50 a.m. BST (2.50 a.m. ET) and up 0.04% against the euro to €1.1555 at the same time.
Here is how that looks:
The UK government delivered a letter triggering Article 50 to the European Commission shortly after midday on Wednesday, officially beginning the two-year negotiation period for Britain’s exit from the European Union.
Markets had largely priced in the event before, meaning that the pound made relatively marginal losses against the dollar — and a slight gain on the euro — in Wednesday’s trading.
Hussein Sayed, chief market strategist at FXTM, says in an email: “Economic conditions in the U.K. are in a much better shape than what was anticipated nine months ago, with most economic indicators surprising to the upside.
Meanwhile, the BoE is likely to turn more hawkish as the depreciation of sterling continues to feed through to increased prices. These factors helped the pound to find a floor in the past 6-months, but the forward outlook will much depend on how negotiations progress in the next couple of months.
He added: “Sterling bears hope that the EU will take a tough stance on the U.K., making it a lesson for the rest of EU countries. This would lead to British completely losing access to the European single market, companies freezing CAPEX, and many multinational companies moving their hubs to different countries. If this was the case, then we’re likely to see renewed selling pressure on the pound, potentially dropping below 1.20.”
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