The value of the pound has taken a hammering since the UK public voted in June to leave the EU, with many UK domestically-orientated stocks bearing the brunt of the falls.
However AJ Bell’s investment director Russ Mould, said that if the British currency can maintain the momentum created by today’s ruling – which went against expectations – investors may need to reassess their preference for dollar earning companies and exporters, and begin to look at “downtrodden domestic plays once more”.
In addition to a rally in the value of sterling today, the FTSE 250 index, which houses more domestically-sensitive stocks also made slight gains. Since Brexit, the index has considerably lagged behind the FTSE 100, an index of the largest companies in the UK, which is more international in nature with companies deriving more of their earnings from overseas.
Commenting on today’s High Court judgment, Martin Arnold, an FX & macro strategist at ETF Securities, said: “Optimism from investors is stemming from the fact that the UK parliament will attempt to steer the UK further away from the ‘hard Brexit’ stance of the Conservative government, which will be less damaging for the UK economy.”
However with the government likely to appeal today’s ruling, Arnold says volatility is likely to remain a feature for currency markets.
“Delaying triggering Article 50 increases the uncertainty of the whole process,” said David Page, a senior economist at AXA Investment Managers. “At the extreme, it increases the opportunity for the UK to express ‘regret’ over the vote and the certainty of the path towards EU exit has diminished a little in the face of this.”
For Architas investment director Adrian Lowcock, today’s news was a clear sign of what to expect over the next few years if the UK proceeds with Brexit.
“Information on the whole process will continue to be in short supply,” he said. “Therefore each new piece will be leaped upon and over-analysed.
“Volatility in the currency and stock market are likely to remain, but the UK economy continues to grow and the return of inflation will create opportunities for investors. Patience and a long-term view is required to navigate successfully through Brexit.”
