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10 July 2018

Markets shrug off Brexit uncertainty

After the resignations of Foreign Secretary Boris Johnson and Brexit Secretary David Davis over Prime Minister Theresa May's strategy for leaving the EU, James Andrews, Director - Head of Investment Management, said:

“Despite the probability of a general election this year or next having risen on the back of yesterday’s resignations, markets have risen slightly, shrugging off the increased uncertainty. Furthermore, the Pound has held up fairly well so far, buying you USD$1.32 or €1.1297 at the time of writing.
 
“Markets are, however, unlikely to warm to the idea of a Boris Johnson-led Conservative government seeking a hard Brexit, not to mention a Corbyn-led Labour government coming to power with the threat of nationalisations.
 
“Past experience tells us that problematic domestic politics can trigger a sharp sell-off in the Pound, and it is unsurprising therefore to see the heavily overseas-biased FTSE 100 holding up well (c.70% of revenues are derived from outside the UK). If we do see a run on the Pound we should all be prepared for strong inflationary pressures across the board, with domestic-focused UK companies coming under pressure, additionally, further damage in the UK retail space would seem inevitable in these circumstances.
 
“From a market perspective then, the hope is for May to hold off any challenge and see a softer (some sort of common market arrangement) Brexit over the line.”
 
Ends
 
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Markets shrug off Brexit uncertainty
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