Directors and strategists across the financial sector have responded to the upcoming resignation of UK Prime Minister, commenting on the effect of Theresa May’s decision on the investment landscape.
Chris Towner, director at financial consultant JCRA and State Street’s Antoine Lesne, head of SPDR ETF Research and Strategy EMEA, have both released statements on the impact it will have on the Sterling currency and how this might influence investment decisions.
Mr Towner has noted that the UK’s currency has been affected by the uncertainty surrounding Brexit, and has performed erratically in recent weeks. He argues that this will not change with Prime Minister Theresa May’s resignation.
He said: “Over the last few weeks Sterling has dropped as speculation has intensified that Theresa May needed to resign in order to clear the way for a new leader. This yet again increases the uncertainty. The chances of further delay to Brexit have now increased but so too have the chances of a hard Brexit. Although widely expected as she approached the podium, Sterling still managed to trade frenetically for a short period of time, before dropping back to a more settled level. Sterling is acting like a rabbit caught in the headlights. Unable to jump up or down.”
On a positive note, Mr Towner did suggest that the economic outlook of the UK was better than perhaps expected at this stage, news that could please investors.
He added: “On the economic data front though, half an hour before her resignation retail sales were released showing volumes up 5.2% y/y. This is on top of a 44-year low in the unemployment rate. If only she could have brought the focus back to the economy, the exit may not have been so sad for her.”
Antoine Lesne, head of SPDR ETF Research and Strategy EMEA, believed that uncertainty over the future outcome of Brexit would continue to affect Sterling but that the UK economy was more resilient than perhaps expected, echoing the words of Mr Towner on the matter.
He said: “Unsurprisingly, after many attempts to pass her Brexit deal through PM, Theresa May’s isolation within her government and party is coming to an end. Does it open a new era with more certainty around Brexit? Probably not. It may also be a resounding sign that the results of yesterday’s European election votes are not positive for the mainstream parties, in particular for the Tories – but we will only know on Sunday.
Uncertainty does thus remain and continues to weigh on Sterling assets. The mayhem (excuse pun) continues and the odds of finding a deal before October 31st 2019 have not improved. It is difficult to imagine a cancellation of article 50 and the ensuing positive impact for sterling. Nevertheless, there is a bit of positive news amidst this saga, which is that despite the uncertainty that has been hanging over the head of the UK economy, unemployment remains historically low, wage growth is still positive and inflation close to the Bank of England target.”
Mr Lesne also provided more positive insights about the developments at Downing Street, and suggested investors my still find opportunities in the UK.
He added: “For lack of a better catalyst, investors may cautiously look at UK equities. Domestic investors can benefit from international exposures and a weaker GBP, while on the bond side we continue to look at the short end of the Gilt curve for lack of clarity on the direction of Brexit negotiations.”
