With Article 50 triggered today, has the British pound already suffered the worst of Brexit anxiety?

General Election - Documents Stock
Does the pound have further to fall? (Source: Getty)

Guy Foster, head of research at Brewin Dolphin, says Yes.

While not as compelling a case as just a few weeks ago, we believe that the pound is currently undervalued.

Fear of a hard Brexit may be realised, and talks between the European Union and the United Kingdom could collapse in acrimony after Article 50 is invoked today. Disagreement over the mooted Brexit bill (which the likes of the foreign secretary Boris Johnson have said Britain should not pay) is just one area of stress. But the British government has to strike this harsh tone as part of its negotiation strategy.

Political risk may grab headlines, but currencies are actually driven by more mundane factors. For example the UK is an economy which is demonstrably closer to full employment than even the United States, implying its exceptionally loose monetary policy could be tightened.

Concerns over the current account deficit have failed to drive currency returns over the last 30 years, and now is probably no different. The risks still seem to be skewed to the upside for sterling.

Dr Savvas P Savouri, chief economist and partner at Toscafund Asset Management, says No.

Let me make two points perfectly clear. For one, the pound has not passed its post-referendum low. For another, as workers, home owners or investors in the UK, we should not be terribly concerned that it faces further weakness ahead.

As to why sterling faces further weakness: it cannot escape being caught in the maelstrom of debate and misinformation over “the future” of the UK economy outside of the EU. This debate will rage for two years from the triggering of Article 50, or until the culmination of a definitive conclusion to negotiations, if this comes sooner.

As to why sterling weakness should be welcomed, the answer is simple enough: it makes us more competitive and our assets more affordable, both of which benefit our economy. The reality is that, in falling after we left the ERM and the 2008 crisis, the pound lifted the UK economy. As it weakens anew it will lift our fortunes again.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

Related articles