‘Struggling in a vortex’
Global currency markets watching how the UK’s post-election uncertainty pans out will likely focus on what it means for the country’s exit from the European Union.
Negotiations with Brussels are due to begin next week, with the outcome expected to have a significant impact on the economies of both the UK and the EU.
Mrs May has been pushing for a so-called hard Brexit – where the UK leaves the EU single market and the customs union – instead of a softer Brexit, where the UK would maintain the benefits of those associations.
“Certainly, prolonged uncertainty would argue for a deeper correction on sterling as May’s diminished Brexit mandate scenario plays out,” said Stephen Innes, senior trader at Oanda.
“However, there are cooler heads in play suspecting the only real option left is the more market-friendly outcome where the UK adopts a European Economic Area styled agreement. So, expect markets to struggle in the vortex of near-term possibilities clashing with longer term probabilities.”
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