Money managers should be ready for “a lot of inefficiency” and currency fluctuations as Prime Minister Theresa May kicks off the official process of the U.K.’s exit from the European Union, a legal expert has told CNBC.
Sebastian Vos, co-chair of global public policy and government affairs team at legal firm Covington, warned currency traders that they should expect lot of uncertainty surrounding the negotiations in the coming months. Vos, a former member of the European Commission, added that sterling could gain or lose 50 percent of its value as the talks unfold.
Positioning in the currency markets saw the pound slip on Wednesday morning ahead of the official triggering of Article 50 – which kick starts the negotiations between the U.K. and Brussels. It hit a low of around 1.2385 against the U.S. dollar overnight after starting the week close to 1.2564. It also fell against the euro, with the single currency worth around 0.8708 against the U.K. pound at around 08:00 a.m. London time.
The currency has seen a wild ride in the fallout of the Brexit vote – where it hit a 31-year low last year – and a slew of traders are betting the currency will depreciate further in the coming months.