If you are consuming the daily feast of UK political upheaval and Brexit chaos as the UK careers towards the 31 October cliff edge with little prospect of a deal, you might wonder, where’s the currency volatility? It should be significant, and probably with a downside bias. So what gives?
The political chaos was predictable. Indeed, ahead of the EU referendum, constitutional and trade experts warned that a ‘cake and eat it’ Brexit was simply undeliverable. The EU has a red line – maintaining the exclusive benefits of the ‘the four freedoms’ for their members – which the UK seeks to cross, leaving the club to seek partnerships elsewhere while keeping the benefits they like. The result is a protracted and difficult negotiation. But did you really need to be an expert to see that outcome?
Perhaps the simple explanation for sterling’s underwhelming reaction to the daily feast of chaos is the age-old market adage: if it is in the papers it’s already ‘in the price’.
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