It has been another dramatic 24 hours for the British Sterling with the currency hitting the floor once again during trading yesterday in what looked like a continuation of the phenomenal fall from the “flash crash”, before the Sterling found stability and regained some ground overnight following the news that Prime Minister Theresa May will hold a “full and transparent debate” with UK Parliament on the Brexit strategy. When you consider that there will be a high percentage of the UK Parliament that will be strongly against leaving the European Union this has provided the opportunity of stability for the Pound after a dramatic couple of days.
While the Pound has found stability since the news of a parliamentary debate on the Brexit strategy, many are still going to ask the question for how long can the currency remain stable. The problem with the flash crash from last week is that such a dramatic decline in the Pound would have eliminated many buyers and consequently encouraged investors to heavily think twice before considering buying the currency in dips. The market in general remains heavily short and the tense comments from both the UK Prime Minister and her EU counterparts on tough negotiations last week have made investors incredibly nervous.
The buying sentiment towards the Pound is still at extraordinarily low levels and it will likely remain this way if the concerns that a “hard brexit” will have severe consequences on a services-led economy and threaten access to the single market of the EU. Members of the UK parliament who are strongly against exiting the European Union are going to have to win the debate and push plans against rushing on EU negotiations, which would mean Theresa May would be under pressure to back down on such a strong approach and this would then reduce the immediate market fears about what is possible to come ahead.
Unless there are reassurances provided that the UK can retain single market status, sellers will remain in the driving seat with the Pound remaining at its weakest level in a generation.