Just when economic data seemed to suggest that the U.K. was dealing well after its post-Brexit vote, news that Article 50 could be invoked by April next year brought jitters back to the market.
How is the U.K. doing so far?
In case you haven’t seen it yet, I came up with a nifty economic snapshot to illustrate how the U.K. has been off to a pretty strong start in Q3, suggesting that Brexit fears didn’t take too much of a toll on performance just yet.
Upbeat inflation, employment, and consumer spending figures were enough to keep the British pound supported for almost an entire week until a couple of British spies – I mean, officials – mentioned that U.K. Prime Minister Theresa May might consider invoking Article 50 earlier than expected. Cable fell more than a hundred pips upon hearing the news while Guppy plummeted from 131.75 to a low of 130.35 in just a few hours.
You see, the idea that the new British government might take its own sweet time in ironing out its plans before staring the official Brexit negotiations with EU officials gave market watchers a bit of assurance that the breakup process might go more smoothly. Many had been expecting PM May to wait until the end of next year before formally notifying the EU of their intention to leave the region. Heck, some were even expecting that the entire thing could be put off indefinitely!
So what’s the rush?
For former cabinet minister Iain Duncan Smith, one of the staunchest pro-Brexit campaigners, the U.K. should rip off the bandaid as soon as possible instead of procrastinating. He even warned that the referendum result could be turned into a ‘neverendum’ if the government allows the anti-Brexit supporters to cause delays.
It’s also important to note that both Germany and France have elections coming up next year and these are likely to bring a fresh round of uncertainty to the European region. Because of that, German Chancellor Angela Merkel and French President Francois Hollande would rather get the Brexit issue off their to-do list before their campaign periods start.
Yikes. Now what?
Prime Minister May is facing increased pressure to get the Brexit ball rolling sooner rather than later, but it’s also worth remembering that she isn’t exactly a pushover either. In her previous stints, Theresa May has proven to be quite the resilient leader herself, taking a hardline stance on issues such as immigration and the government’s investigatory powers. This suggests that there’s a pretty good chance that she would stick to her initial timeline for invoking Article 50 instead of bowing down to her critics.
Still, any confirmation that PM May is willing to move forward with the Brexit as early as April next year could put more weight on the pound as market participants turn their attention back to the potential gloom and doom that the U.K. economy could face. Stay on your toes, people!
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