May 23, 2019 / 9:16 AM / 4 months ago

Sterling would test decade lows vs euro in no-deal Brexit: UBS WM

FILE PHOTO: Pound coins are seen in the photo illustration taken in Manchester, Britain September 6, 2017. REUTERS/Phil Noble/Illustration

LONDON (Reuters) - A no-deal exit by the United Kingdom from the European Union would push sterling to its lowest against the euro since the global financial crisis a decade ago, UBS Wealth Management said on Thursday as uncertainty over the chaotic process deepens.

The asset management division of UBS said in a note the UK currency would hit 97 pence, just short of parity against the euro. That would be its weakest since December 2008.

It also predicted it would fall to $1.15, its lowest since a flash crash in October 2016.

“Investors should not be complacent about the threat of a no-deal exit,” said Dean Turner, UK economist at UBS Wealth Management.

In turn, a decision to remain in the bloc would likely cause a swift rebound in sterling. Turner said he believes the pound is undervalued relative to its purchasing power parity level of around $1.58.

Sterling was trading at 88.25 pence against the euro and $1.26 by 0907 GMT.

Reporting by Josephine Mason, Helen Reid and Abhinav Ramnarayan; writing by Josephine Mason, Editing by Helen Reid

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