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Volatility in the pound as UK prepares to trigger its exit from the EU
Thursday 23 Mar 2017 Author: Tom Sieber

The starting gun on Brexit is set to be fired on 29 March. That is when Government will trigger Article 50 and formally begin the process of leaving the European Union (EU).

Sterling dropped in the immediate aftermath of the news. This is somewhat surprising given the guidance had always been for Brexit to be triggered at the end of March.

Sterling swings wildly

The pound since recovered with a higher than expected inflation reading (21 March) building the case for a UK interest rate rise, but the reaction suggests the currency will remain volatile as the UK navigates its departure from the EU.

This has implications for all investors, not just currency traders, as the performance of sterling has a bearing on how the overseas earnings of UK stocks are valued.

What happens next?

An official response from the EU is expected within two days of Article 50 being triggered with negotiating guidelines for the bloc expected to be in place late April at the earliest, at which point talks are likely to begin in earnest.

Under the two-year timeframe mandated by Article 50 the UK should leave the EU in spring 2019. The Great Repeal Bill, which will ensure EU law no longer applies in the UK, is expected to be included in the next Queen’s Speech in May.

The plan is to pass the legislation ahead of Brexit but for it to become law only once Brexit is complete.

We will explore what the triggering of Article 50 means for investors in next week’s issue of Shares. (TS)

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