Strength shown by the Pound Sterling against reserve currencies in the months after Brexit may have been the calm before a distant storm. For the Pound Sterling, the center has essentially held in the aftermath of the Brexit vote. Come March 2017, the formal exit of Great Britain from the European Union begins in earnest.
The GBP/USD futures contracts for December were trading on the CME in London between 1.2379 and 1.2448 in midday trading to 1.2366 after opening at 1.2444. The 52-week low is 1.1789; the high for the same period. GBP/euro futures for December traded between a low of 0.89980 and a high of 0.90545
Data that will have an impact on exchange rates this week are the U.K. Consumer Price Index on Tuesday morning, Average earnings will be released Wednesday morning with Retail Sales figures coming Thursday.
Nigel Green, founder and CEO of deVere Group, noted last week that British Prime Minister Theresa May outlined the timetable to commence negotiations. May indicated that she would trigger Article 50, the clause needed to start the Brexit process, by the end of March. "There's an uncertain road ahead for the U.K. in the run-up to Britain's formal divorce proceedings with the EU," Green said. "Until the talks start, there will be no clear answers to the important questions about the U.K.'s future relationship with the EU or the rest of the world and this is going to create ongoing uncertainty."
"This trend has already manifested itself," he continued. "We saw sterling fall to a three-year low against the euro and its lowest level against the dollar since the beginning of July on October 3 following May's announcement. It's a trend that will likely gain momentum as the start date for negotiations draws nearer."
The concern with Brexit was not only with Brexit itself, but with a domino effect that will follow--one that neither the U.K. nor the European Union will be immune from. Columbia University Business School Professor Michael Morris raised these issues at the Society of American Business Editors and Writers conference in New York on Thursday. "Will it (Brexit) lead to Scotland joining the EU or an EU member leaving the union itself?" he said. "Those are going to be burning questions going forward."
Prime Minister May has been under new pressure to launch a Brexit do-over by allowing MPs a vote on membership in the European single market, with MPs from major parties asserting that the referendum did not amount a "hard exit" from the EU.