Theresa May Plans United Kingdom Exit from European Union by End of March: Pound Sterling Rallies as Euro Loses Ground
Britain’s departure from the European Union looks all but likely to go ahead towards the end of March after Article 50 passed through both Houses of Parliament yesterday. The passing of Article 50 will enable Prime Minister Theresa May to initiate the United Kingdom’s (UK) exit from the European Union (EU), which, after months of deliberation, puts a formal timeframe in place that is expected to assist the UK economy and Pound Sterling (GBP) in the long-term.
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Following the passing of the Brexit bill, Economists and Investors immediately appeared Bullish on the GBP, which saw gains of 0.5% in the European Session yesterday against the Euro (EU). However, while the long-term effect of Brexit is perceived to have potential benefits for the UK economy, there is expected to be some turbulence in the short-term value of the GBP as Scottish Minister Nicola Sturgeon calls for a new referendum.
As May dismisses the likelihood of the referendum being approved to proceed, there are a number of currency analysts speculating on the potential negative effects of a political divide between the nations that constitute the UK, which could ultimately slow growth forecasts outlined by the Bank of England as Scotland seek Independence.
With structure and clarity regarding the UK’s exit from the EU starting to take shape, the Euro itself saw sharp declines overnight as it eagerly awaits this week’s Dutch election. The rise of populism throughout the Eurozone has traders in a precarious position as they assess the real strength and stability of the Euro. Speculation surrounding the direction and future of the EU remains increasingly uncertain, putting a halt to the recent rally of the Euro, which is currently losing ground against a basket of major currencies due to the risks associated with the EU’s current political climate.
In an attempt to reverse the negativity surrounding the EU since Brexit, European Central Bank (ECB) President, Mario Draghi, yesterday outlined the need for productivity growth throughout the EU, focussing on Entrepreneurship and Innovation in an attempt to reinstate social security and high wages as the primary features of the European economic model. However, Draghi’s speech failed to calm markets as traders began selling the Euro despite the reduction in deflationary risk that has hindered the Euro over the past few months.
At the time of writing this, the GBP EUR exchange rate was trading at 1.1456.