With Brexit approaching, traders start questioning the value of the pound

Negotiations and debates alongside Brexit have reached a critical point … at a standstill. This leads investors and traders who primarily trade pounds to seriously take the opportunity of Brexit no-deal.

“Which country will blink first? We are not sure, but investors will have to appreciate the possibility that no country will blink at all”. – says Stephen Gallo, chief FX trader at BMO Capital Markets.

Last week’s vote in the British Parliament sent an uncertain signal to Brussels. On the one hand, most politicians have shown that they will not support the no-deal option whereby British will leave the EU without a formal agreement under WTO rules. But with almost the same majority, there were people who voted to change the existing EU withdrawal agreement, which was also adopted by Brussels last year.

EU representatives quickly rejected the option of renegotiation and at the moment Gallo believes we have entered a “game of chickens” between Brussels and the UK.

Kit Juckes, chief FX strategist at Societe Generale, believes that the pound is currently stabilized at its current levels, but can make big movements against the euro and the dollar this week. He stakes a no deal option at which the price of pounds against the dollar will reach $ 1.20. At the moment, the price moving around $ 1.30 correctly reflects the tension. “In the long run, the pound is already exhausted enough.” – adds Kit. According to him, future deferral or suspension of Brexit would result in the launch of the pound to $ 1.50.

Source: CNBC