UK: Uncertainty weighing on the pound – Handelsbanken

Sterling has weakened substantially in the past few days and is currently trading around 0.87 versus the euro. Kiran Sakaria, a Strategist at Handelsbanken, analyzes the pound’s outlook.

“This weakness is due both to the escalating virus crisis and the renewed fear of a no-deal Brexit, as it has become clear that the UK and the EU are a long way apart, now that the negotiations have begun.” 

“The coronavirus outbreak has caused the Bank of England to promise that it is ready to take the necessary measures to ensure financial stability, and the market is currently pricing in two policy rate cuts from the BoE by June at the latest.” 

“In the coming days and weeks, we expect the increasing uncertainty to continue to weigh on the pound.”