The pound has shrugged off a massive government defeat in the UK House of Commons tonight, perhaps because investors see the government’s threat of a no deal Brexit as illusionary given the increasing control over the Brexit process that the legislative body is now taking, affirms the CEO of one of the world’s largest independent financial advisory organizations.
The forecast from Nigel Green, founder and chief executive of deVere Group, comes as UK Prime Minister Theresa May lost the meaningful vote on her government’s EU withdrawal agreement by a significantly large margin of 230 votes and the pound rose by approximately one and a half U.S. cents in response.
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Mr Green notes: "It appears the British government is currently in brinkmanship mode.
"Mrs May says she is not ‘running down the clock’ to the deadline of 28th March, but in all likelihood she will be re-submitting her Brexit plan with only a few minor tweaks, and so taking up government and parliamentary time that could perhaps be spent exploring other options that can command more support from MPs. In all probability, the government will seek an extension to Article 50.
Mrs May does not want to be the Prime Minister who takes the country into a chaotic no deal Brexit on 29th March.
"The longer the Brexit process is extended, the less chance of a no deal and greater chance there is of a second referendum that will reject Brexit, or a soft Brexit. This will please global financial markets and favour the pound and UK financial assets.”
He continues: “Following the leader of the opposition Labour party, Jeremy Corbyn’s tabling of a vote of no confidence, there is greater chance of a general election. But in normal times this would spook the markets and have a directly negative impact (in the short-term at least) on the pound, the FTSE and UK financial assets generally.
"But these are not normal times, and the DUP and Conservative MPs who vote against the government’s Brexit bill are unlikely to vote against the government. A general election seems a low probability outcome."
Mr Green concludes: “As the uncertainty rumbles on, portfolio diversification should remain the major strategy for investors.”
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deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients. It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.