Brexit Uncertainties Weaken The Pound
October, 2018
AK Equity Group
Earlier this month, Washington Post journalist Jamal Khashoggi was believed to have been murdered in the Saudi consulate in Istanbul. As reported by Turkish officials, the murder was said to have been premeditated and has since sparked international backlash against Saudi Arabia.1 Cascading into markets as a risk event, investors flock into safe haven assets as we may likely see a reduction in global investments in Saudi Arabia.2

Italy’s rejected budget by the European Union was further solidified by ECB’s Mario Draghi in a recent press conference stating “Rome should lower the tone of its fight with Brussels over its contested 2019 budget and stop questioning the existential framework of the euro.” Additional risk is seen in the markets as Italian Deputy PM Luigi Di Maio’s response was that Draghi is poisoning the atmosphere and should be supporting Italy instead.3

Brexit uncertainties continue to weaken the pound as a no-deal situation appears to be more likely after talks with Brussels came to a halt at the EU summit in Salzburg. Disagreements inside the UK government and Prime Minister May’s own cabinet did not help the outlook of a good Brexit and we may see further downside until talks resume on a positive note.4

Additionally, the US-China trade war seems to have no end in sight as the Trump administration will not be participating in trade talks unless China caves into its demands, a situation which looks unlikely at this point.5