The Pound Turkish Lira (GBP TRY) exchange rate tumbled this morning as investors reacted poorly to Parliament’s vote to allow the government to trigger Article 50, paving the way for Prime Minister Theresa May to start Brexit later this month.
Despite knowing for a number of months that the formal Brexit process was likely to begin by the end of March, markets were still spooked this morning by the uncertainty that two-years of negotiations will bring.
George Saravelos, currency strategist at Deutsche Bank said;
‘I think the market is slowly starting to realise that Brexit is anything but priced in. How can you price in an event of incredible complexity that has never happened before? We remain very bearish on the pound.’
GBP investors are particularly fearful of Theresa May’s plans to leave the single market as she pursues a ‘hard Brexit’, a move that analysts believe will damage the UK economy as British companies face the possibility of having costly tariffs placed on all goods traded with the continent.
Meanwhile the Turkish Lira has been pressured by the diplomatic spat between the Netherlands and Turkish President Recep Tayyip Erdoğan as he accused the Dutch government of ‘Nazism’.
The row follows the move by the Dutch authorities to block a political rally organised by Turkey, with the aim of persuading Turkish expats to vote for a controversial bill that will grant Erdoğan wide sweeping executive powers, with the President reacting by barring the Dutch Ambassador from returning to Ankara.
The move has done little to boost the appeal of the Turkish Lira, which was already seen by many traders as being too risky an investment due to political instability and with Erdoğan stepping up his vitriol against other EU members he also runs the risk of alienating himself from potential economic partnerships.
Looking ahead the Pound is likely to remain on the back foot this month as markets brace for the triggering of Article 50, with Sterling also likely to be negatively impacted by the latest employment data tomorrow as average earnings are forecast to have fallen from 2.6 to 2.4% in January.
Meanwhile the Turkish Lira may find its gains muted tomorrow by the release of the latest domestic labour report, with the unemployment rate expected to have risen from 12.1% in December.
Current Interbank Exchange Rates
At the time of writing the GBP TRY exchange rate was trending around 4.55 and the TRY GBP exchange rate was trending around 0.21.
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