Not so fast…

Not so fast…

almost 5 years ago1 min

📈 The pound’s value risen this week, primarily thanks to the increasing likelihood that the UK’s exit from the European Union gets delayed – and the decreasing likelihood of an eventual “no-deal” Brexit.

But fools may be rushing in where investing angels fear to tread, according to analysts from UBS Wealth Management 👼

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The last fortnight’s seen the pound’s value rise significantly versus both the US dollar and the euro, hitting its highest level since May 2017 compared to the latter. The pound fell slightly from recent peaks on Thursday, but still...

The pound is near 7-month highs vs. the dollar
The pound is near 7-month highs vs. the dollar

🤓 UBS’s analysts weighed in this week, advising investors not to get too carried away as “downside risks for the British pound remain in place”. Even so, they didn’t recommend outright selling: “sterling's moves still wholly depend on political news, while economic fundamentals remain on the back burner.”

Any Brexit delay is likely to be short, and isn’t guaranteed to end with an exit agreement. Analysts at investment firm GAM argue that any short-term gains could soon evaporate:

“If the deal is agreed, sterling could move higher in the short term but, ultimately, would likely drift back as the country’s economic uncertainty would be the next driver of sterling’s fortunes.” 💷

Nevertheless, UBS believes the pound “remains very undervalued on purchasing power parity terms” – in other words, that it’s an attractive long-term investment once the current political impasse is resolved.

Buying the pound could be a good bet for long-term investors – but beware chasing your tail in the short term.

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