GBP's depreciation is a short term reaction of the nervous market

Today, the British currency, GBP, hit 31-year low, because of the increasing hear of a hard Brexit deal with the EU. Moreover, following the Mrs May’s speech, Goldman Sachs predicted a further 5 per cent drop, which could drag GBP to 1.20 dollars. I think such drop is not only caused by people’s increasing worry about getting a tough deal with the EU, it is also caused by Mrs May’s planned schedule of triggering Article 50 is earlier than many people’s estimates that some people think it could take at least another year for Britain to trigger the article.

I do not think that such a drop could cause a huge loss in the British market, as I see it is a short term market’s response to the information. Such depreciation of the British sterling cannot last very long unless the situation of Britain’s negotiating the trade deal with the EU continues to worsen. There will definitely be another shock in the foreign exchange market in the future when Britain officially triggers Article 50 and starts the trade deal negotiation with the EU. The evidence of showing it is merely a short term market reaction to the news is today’s UK stock market gains due to the sterling depreciation.