Sterling is down almost 10% against the euro in the past six months. Many people automatically assume this is because of fears over Brexit. However, there are probably other factors at play too.
“People have been taking the slide of the pound as a reflection of Brexit without thinking of what’s going on in the UK economy,” said Fred Jeanmaire, a European equity manager at Columbia Threadneedle, referring to recent slumps in real estate prices and a more general slowdown of the UK economy. Jeanmaire believes Brexit is not likely to happen since Britons tend to stick with the status quo. “It is a major risk, but in the end, the British population is quite conservative. They still have a queen.”
Polls we held elsewhere in Europe this spring also all gave similar results, albeit they were not all as conclusive. So, if it’s not Brexit, what could be the trigger for the sterling slide? In fact, the currency’s weakness has very much to do with market expectations of a BoE rate hike being pushed forward since the beginning of the year, said Ed Smith, investment strategist at Rathbones, a UK asset manager. This, in turn, may be related to the possibility of the UK leaving the EU, Smith admitted, but it’s also a response to weaker economic data… Read More >>
[Source: Portfolio Adviser – written by Tjibbe Hoekstra – May 24, 2016]
