American bank JPMorgan Chase downgraded its annual forecast for the pound to $ 1.29 from $ 1.35- $ 1.36 against the background of increased uncertainty around the UK exit from the EU.
“Predicting the outcome of Brexit has become more difficult,” JPMorgan representatives said.
They believe that the risk premium for uncertainty in the pound will increase over the coming months, as more and more attention is paid to who will replace Theresa May as the chairman of the Conservative Party and the head of the Cabinet of Ministers of the United Kingdom.
10 people will fight for the post of Tory leader and prime minister of the country, announced the day before the management committee of the Conservative Party.
It is noted that this is the largest number of candidates for this post in history.
Prior to this, the maximum number of applicants was five people – in 1997 and 2016.
According to experts, the leaders of the race are former British Foreign Secretary Boris Johnson, who replaced him in this post, Jeremy Hunt, former Brexit Minister Dominic Raab and current Minister of Natural Resources Michael Gove.
“The election campaign is presented by supporters of Brexit, and the confirmation that the government under the new leadership is ready to turn around in the direction of a more” tough “scenario may further irritate investors,” say JPMorgan currency strategies.
According to them, the following scenarios are possible in the UK, from the implementation of which will depend on the further dynamics of the pound sterling:
1. Foggy Albion leaves the EU in accordance with the terms of the current agreement developed by T. May and the Alliance. In this case, the pair GBP / USD will rise to the level of 1.33.
2. In the United Kingdom, new general elections are scheduled. The pound can either fall in price to $ 1.20 (if the conservatives, led by a supporter of the “tough” Brexit) win, or go up in price to $ 1.31 (if the Labor coalition wins and eases the country’s softer exit from the EU).
3. There will be another referendum on UK membership in the EU, which will offer the pound to choose between $ 1.20 (if the country votes again for the exit) and $ 1.40 (in case of Brexit’s refusal).
4. Continuing political paralysis and the further postponement of Article 50 of the Lisbon Treaty condemn the British currency to a constant drift in the region of $ 1.25.
The material has been provided by InstaForex Company – www.instaforex.com