2016.07.2907:24:00UTC+00Fxwirepro Long Term Outlook: Sterling Likely to Drop Below Parity Against Franc

The trouble with the pound sterling can hardly be called to be over. The referendum effect is still unfolding and there are still a lot left to be unfolded. The UK’s first trouble will begin after it officially triggers the article 50 by sending a formal letter of intention to the commission. Article 50 is the part of the Lisbon Treaty, which as a matter of fact is a European Treaty and favours the EU.

If you remember the tough negotiations the United Kingdom had when former Prime Minister David Cameron was negotiating reforms with his European partners. There are 27 members in the European Union excluding Britain and many of them have no likings of the British. In addition to that, the European members will firstly work to make Brexit its last. Many would like to recommend making an example of the UK, so no one else chooses to leave.

An additional pressure is hanging over the pound and that is the monetary policy divergence. The Bank of England (BoE) is very much likely to ease policy; even if it doesn’t rate hike from the central bank isn’t coming anytime soon.

We expect the pound sterling to drop to parity and below against the franc. One of our successful model that rightly predicted the Brexit outcome pointing to that direction. The pound is currently trading at 1.284 against the franc.

The franc can be considered one of the strongest currencies in the entire European region.