Hard Brexit talk will push the pound into further volatility and greater uncertainty for investors over the coming months, an investment specialist has claimed.
Prime Minister Theresa May announced her plans to invoke Article 50 at the end of March 2017 - beginning the UK's two year exit from the European Union - prompting a slide in sterling which eventually hit a 168-year low.
The ensuing uncertainty has already sent nervous investors into action, especially as, according to Viktor Nossek, director of research at WisdomTree, there is a risk of the pound devaluing further.
He said: "France and Germany look likely to maintain their position for a ‘hard Brexit’, something the Conservative government looks keen to back, meaning there is a further risk of the pound devaluing further as access to the single market and passporting rights of UK financial services firms are compromised."
The pound, which had already taken a hit on 24 June when the UK voted to leave the European Union, rallied slightly after it was announced that MPs would get a say in the final exit deal.
At the time of writing, it is now at $1.23 against the US dollar, marking the biggest gain for sterling since mid-August.
However, Mr Nossek said: "Even once formal negotiations start between the EU and the UK, no-one knows what trade agreements will be in place. Trade deals are now done more often than not at a bloc level, meaning the UK could be left with little leverage when forming new partnerships.
"As we have seen in the past year, currency markets hate this sort of uncertainty and the probability of the UK benefitting appears to be low. Consequently, we would expect unpredictability to continue, both up until Article 50 is triggered and over the long-term future where negotiations have the potential to drag on.”
His comments came as research carried out by FTAdviser Advantage found that advisers have already begun to rebalance and protect their clients' portfolios against the continued devaluation of sterling.
According to the survey, 53 per cent of advised investors have already asked their advisers to position their portfolios to shelter them against the full effects of a drop in sterling.
This follows research by peer to peer lending platform Octopus Choice, which has found £10,000 deposited today in the average one-year fixed-term savings account will be worth just £9,933 in real money when it is withdrawn a year later.
This is because of the "toxic combination" of rising inflation and low interest rates, according to Richard Wazacz, head of Octopus Choice.
