The pound is at a loss, the resignation of Theresa may can only increase uncertainty on Brexit


From the highs of the current year, the pound sterling lost about 5%.

According to a number of analysts, the further dynamics of the British currency will largely depend on who will be the successor of Prime Minister Theresa May and how determined he will be in matters of Brexit.

The process of electing a new leader of the Conservative Party will start on June 10 and will take about one and a half months.

It is assumed that the new Prime Minister of Britain will receive either directly before the summer parliamentary recess, which will begin in late July, or already after them in September.

Meanwhile, the Brexit question is still open, and it is not quite clear what scenario will take place.

Traders say that the chances of implementing the "hard" scenario have increased, since four out of eight contenders for the Tory presidency said that the United Kingdom must leave the EU on October 31, even if the "divorce" agreement will not be concluded.

However, it is possible that T. May will retire for a reason, and will accept as a condition the acceptance of her version of the deal with Brussels, or the so-called "soft" exit from the EU.

It should be recognized that this option is not very advantageous for the UK, but it is much better than the "hard" scenario, in which the country's GDP risks losing up to 10%.

Prospects for the pound

Until now, the British currency reacted sluggishly to the news on Brexit, as investors stopped waiting for any real action. If the situation continues to develop in the same way as before, everything will remain at the same levels.

If a new referendum is held, it will lead to a weak negative reaction of the pound. However, if it comes to a "hard" exit, then it will certainly hit the sterling, since it is obvious that this is a very disadvantageous option for Britain.

Experts assume that if the trend for the fall of the GBP/USD pair is maintained, the pound rate may reach parity with the dollar in a year or two.

Thus, the inability of the United Kingdom to withdraw from the EU on favorable terms creates a threat to the country's economy, growing internal political contradictions also frighten investors, and public sentiment does not allow us to reverse the exit process from the alliance. According to the results of the recently held elections to the European Parliament, the Brexit Party received the largest number of votes, which generally confirms the desire of British citizens to leave the EU. However, as we have seen in recent months, the possibility of a country leaving the bloc without a deal is unequivocally rejected by the House of Commons. Therefore, with the arrival of the new prime minister, political uncertainty is unlikely to be resolved.

The material has been provided by InstaForex Company -