Salman Ahmed, Chief Investment Strategist, Lombard Odier Investment Managers comments:
“As Prime Minister Theresa May set the Article 50 exit process in motion, investors should be mindful that from this point onwards there will be less smoke and mirrors and an immediate reduction of uncertainty surrounding Brexit. Going forward the UK and EU will need to be clearer on what they want and where compromises will occur.
“Investors should be braced for some Sterling volatility but in my opinion it will remain range bound over the next few months. Article 50 has been largely priced into the pound as reflected in extreme shorting positioning and I believe that any negative impact from negotiation noise will be offset by the Bank of England’s hawkishness as inflation rises further.
“Looking ahead, initiation of the Brexit process indicates the reconfiguration of the EU has started. The bigger question remaining for me is whether the EU chooses to take the role of conciliatory or confrontation as talks progress.
“We should all keep in mind that the drivers behind the rise of populism and indeed Brexit are prevalent in many other EU member states, not just the UK. If the EU can survive a crash free 2017 – politically and economically – then I think it gives the authorities precious time to arrest the rise of dysfunctional populism. In the meantime, all eyes are now on France, which is increasingly looking to go the Dutch way with polls suggesting rising support for the pro-EU candidate.”