Economy

Sterling nears one-year low as Brexit selloff mounts

Sterling extended losses on Thursday to approach a one-year low as markets grow nervous Britain will leave the EU without an agreement on its future relationship with the bloc. David Pollard reports.

(REUTERS / BANK OF ENGLAND / BLOOMBERG) – Markets hate uncertainty – what forex traders currently might call the fear of the unknown.

Thursday was another day for sterling to slide …..

It’s dropped through $1.30 to around a one-year low against the greenback – the euro is above 90 pence for the first time this year.

The pound’s rout gaining speed since the weekend – when UK trade minister, Liam Fox, warned he saw a 60 per cent chance of a no-deal Brexit.

GLOBAL FINANCIAL ECONOMIST, COMMERZBANK, PETER DIXON,

“For a man who said just two years ago that signing a deal with the EU would be the easiest one in history, that does represent a remarkable turnaround. And I think it says … that clearly the UK is looking down the barrel of a gun.”

It didn’t stop Mark Carney pulling the trigger on a rate hike last week.

Though the pound slipped when the BOE governor also warned of an ‘uncomfortably high’ risk of no deal.

After a bad-weather blip, the Bank predicts 1.4 per cent growth this year – a pick-up to 1.8 per cent next.

The first estimate for second quarter GDP is due on Friday.

CITY INDEX MARKET ANALYST, KEN ODELUGA,

“We’ve seen some signs that recovery has continued, but I think really these data are anyone’s guess. And that’s the real risk, especially given where we are now in the cycle and with Brexit coming up.”

Predicting what a no-deal would mean is an even bigger challenge.

CITY INDEX MARKET ANALYST, KEN ODELUGA,

“Logjam: a complete breakdown of the ability to not only do business but also to travel into the European Union …. And that is just on the level that we can immediately perceive.”

That clearer heads will prevail in EU/UK negotiations is one hope among economists.

If a deal is secured, sterling will recover, they say, and the Bank of England will hike again.

Only one in four in a Reuters poll see ‘no deal’ by Britain’s exit date in March ….

Though that is up from the last poll – and if they’re right, this sell-off could just be a taste of what’s to come.


Associated Links

  • ThomsonReuters
  • Bank of England
  • Bloomberg
  • Stock market crashes
  • European Union
  • Euroscepticism in the United Kingdom
  • Brexit
  • Politics
  • United Kingdom

    Leave a Reply

    Your email address will not be published. Required fields are marked *

    This site uses Akismet to reduce spam. Learn how your comment data is processed.