FX168 Financial News (Hong Kong) - According to Bloomberg, the strategists of the internationally renowned investment bank Barclays released a report on Monday (November 19), saying that in the absence of an agreement to leave the EU, pound It is likely to fall by up to 10%.
The report points out that due to the possibility that British Prime Minister Theresa May faces leadership challenges, the pound may continue to be under pressure.
Barclays believes that the final exit agreement will be approved, but the possibility of leaving Europe without an agreement has increased.
Last Thursday, British Prime Minister Theresa May experienced the most turbulent day since she took office. On that day, four senior ministers, including Brexit Minister Rab and Employment Security Minister McVeigh, and several government officials resigned.
Their resignations and the departure of other cabinet members made enterprises worry again that the UK may leave the EU without reaching an agreement in March next year.
Barclays report shows that the exchange rate of sterling may continue to be affected by news.
The bank pointed out that the vote of no confidence would push the pound lower, but Barclays believes that the market has largely digested this result.
The Sun reported on Monday that 42 members of the Conservative Party of Theresa May confirmed that they had submitted letters of no confidence against Theresa May, and 48 letters could trigger a vote of no confidence.
In addition to the Sun, the Sunday Times reported that seven major Conservative MPs were preparing to impeach British Prime Minister Theresa May. The newspaper said that the vote of no confidence could be held as soon as Tuesday.
The Barclays report points out that in the event of Brexit without agreement, the pound may fall by 5% - 10%.
Barclays believes that further movements of the pound may be limited by the already quite cheap valuation of the pound.
In Asian trading on Tuesday, the pound/dollar was at around 1.2860.
(Source of weekly chart of GBP/USD: FX168 Financial Network)
According to Bloomberg last Friday, Crispin Odey, a well-known hedge fund manager, said that if the UK left Europe without an agreement, the sterling exchange rate could plummet by 20%.
Odey is currently shorting sterling and the UK stock market. Odey has repeatedly warned of market chaos but failed to bet.
Odey said in an interview: "The pound is very, very undervalued. Even so, the pound may decline further."
He pointed out that if there is a hard exit from Europe, the pound may fall by 20% within a week until it rebounds.
Based on the Big Mac PPP model, the pound is currently about 30% lower than its fair value, ranking second among the G10 currencies.
Since the Brexit referendum in June 2016, the British pound has fallen by about 14%, close to the lowest level since the 1980s.
As the number of letters of distrust from Prime Minister Teresa May continues to increase, the options market has made "big moves".
Bloomberg reported on Monday that the short position of sterling was the largest since June 2016. Compared with the call option, the premium of the put option is the steepest level since June 2016.
(Picture source: Bloomberg, FX168 Financial Network)
Checked by: Zui Qingfeng
