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This is Richard Lawrence. I’m a senior vice-president on the portfolio management team at Brandywine Global in Philadelphia.

So how’s Brexit affecting currency? The short answer is not very much. When I look at both the euro and the pound, which of course would be the two currencies most likely to be most impacted by Brexit, they’ve actually both range-traded and you could say they’ve both been remarkably resilient in the face of significant uncertainty. From sort of the third quarter of 2018 through early in the second quarter of 2019, the euro has effectively traded in about a 3% range and it’s not been a dissimilar story for the pound, either. The pound was higher in 2018 and then started to weaken as the negotiations dragged on.

But I would say relative to what you might expect in terms of a negative sentiment on the currency, it’s remained remarkably resilient. I do worry longer term about the effect Brexit’s going to have on the U.K. economy. When you look at factors like business investment as a share of growth in the U.K., it’s gone from being a strong positive and now a negative. So you’re clearly seeing businesses reduce the amount of investment they’re making in the U.K. And longer term that could become a structural headwind for the currency. We’re seeing jobs leave London to go to other financial centers in Europe. Again, longer term that creates a little bit of a headwind for sterling; [it] could be a favourable outcome, though, for the euro.

In aggregate, I really don’t know how this is going to end. Obviously we’re in a phase of negotiation right now across parties in the U.K. and not sure how that’s going to turn out. And we’re still focused on the Halloween new deadline that’s been set for Brexit. I would expect currencies to be still somewhat range-bound going into that Oct. 31 deadline.

So Brexit is not the only factor when we think about the euro. The euro has been range-trading now for several months and it’s been a remarkably resilient currency. When you think about how weak the data has been in Europe, you would imagine that the euro would be trading far lower. What we infer from that is that the euro looks like it’s just trying to sniff out a little bit better of an environment in Europe. And we think one way we possibly get there is with the stimulus that we’re seeing in China. China and Europe are large partners. We’re seeing a significant pickup in stimulus in the Chinese economy. We think that is going to be a positive for the euro zone economy and we think that’s what’s getting reflected in the resilience that we’ve seen in the euro.

I would characterize us right now, in the second quarter of 2019, I’d say we’re in the green shoots phase of that. Things are sort of just bottoming out. They haven’t even really turned yet. But I think one of the surprises in the global growth distribution story later in 2019 might be the rebound we think we’re probably going to see in European data.

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