The British pound is expected to face increased volatility over the coming months as the deadline approaches for the UK to leave the EU at the end of October and according to one analyst, those prepared to ride out the wave of uncertainty may be rewarded as the year comes to an end.
One of the risks investors will have to ride out is the possibility of a general election being called as the New Prime Minister in waiting Boris Johnson will not have enough votes to push through his agenda and will need a new election to make up the numbers.
"Any new leader might struggle to command House of Commons support, with the Conservatives still in a minority, and with Brexit having frayed many of the traditional relationships between and within various parties. The new leader might feel the need to push for a clear 'mandate'," said Dominic Bunning, a strategist at HSBC.
"The risk of another significant change in politics – whether because of a change in Government or a significant shift in UK-EU relations – will likely create enough uncertainty to keep GBP soft for the near future," he added.
Although the chances of a no deal Brexit have risen, and the UK may leave the EU without an agreement HSBC predicts that an agreement will eventually be reached at the 11th hour which should see the pound skyrocket from its current level of around $1.2750 to $1.37 by years end.
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