According to the leading US investment banking giant, Morgan Stanley, the nervousness in financial markets over the “hardline” approach adopted by both UK PM Hopefuls Boris Johnson and Jeremy Hunt risks knocking-off the pound from its current level of $1.24 vs. the greenback to the lowest level since it almost reached parity in the mid-1980s.
Key Quotes (The Guardian):
“The pound has come under intense selling pressure since Prime Minister May withdrew from her party leadership position, leaving markets with increased concern that the UK may be heading towards a harder Brexit.”
“Should this scenario materialize, pound-dollar could fall into the $1.00-$1.10 range.”
“Markets have adjusted these probabilities sharply lower.”
“Should the new PM adopt a moderate negotiation stance, we expect the pound-dollar to trade within its current range with $1.20 as the lower end of the range. Should the new PM strike a deal with the EU and bring it through parliament, the pound may rally. The stance of the Labor party will be important for the pound’s valuation too. Should the Labor leadership move closer to a pro-EU approach, the pound may reach $1.35.”
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