Candriam’s head of Asset Allocation Nadège Dufossé commented on the Brexit speech of Britain’s prime minister Theresa May, who paved the way to a hard Brexit on 17 January 2017.
Dufossé said the speech has been anticipated by the markets, explaining the reaction of the markets and the rebound in the pound yesterday.
“Short positions taken by investors as a result of the lack of clarity regarding the situation were partly reversed as Theresa May’s speech offered some relief,” Candriam’s head of Asset Allocation pointed out.
Dufossé also highlighted the decision of Britain’s prime minister to put the final deal to vote in both houses of Parliament.
“The consequences are not clear but markets could also take into account the possibility that Brexit might in the end not happen… This is paradoxical since it wouldn’t be positive to imagine after years of negotiation facing a rejection vote on the deal,” she said.
Candriam remains “cautious at this stage”. Dufossé argued that there is no sign of a negative impact of Brexit on the UK economy yet but the country should face some weakness ahead.
“Negotiations will be tough since the European Union will have to show its political strength if it wants to preserve its integrity. The currency should remain volatile and globally under pressure. We foresee a wide range between 0.83 and 0.94 against the Euro.
“We remain negative on the UK equity market, particularly on the more domestic index, FTSE 250. We also expect higher yields with increasing inflation pressures,” Candriam’s head of Asset Allocation said.