Sterling falls to three-year low against the euro
Sterling fell to a three-year low against the euro and within a cent of a three-decade trough against the dollar on concern Britain may face a so-called hard Brexit after Prime Minister Theresa May pledged to start pulling Britain out of the European Union by March. Contagion to other global markets was limited, leaving bonds little changed and equities rising with oil and metals prices.
Sterling dropped by the most in two weeks, helping support British shares. The pound has sunk about 13 per cent versus the dollar this year, making it the worst-performing major currency, on concern Britain’s decision to quit the EU will force it out of the single market, hurt exports and dent financial services.
With negotiations on the terms of the exit yet to start, business groups and foreign capitals are grasping for more detail. May told her Conservative Party’s annual conference in Birmingham that she’ll invoke Article 50 of the EU’s Lisbon Treaty – the formal trigger for two years of talks – by the end of March.
“Yesterday the impression participants got was that the pendulum has swung towards a hard Brexit,” said Neil Jones, head of hedge fund sales at Mizuho Bank in London. “Hard Brexit is a sell for the pound. I know the government line is that they don’t see a need to differentiate between hard and soft Brexit, but the market certainly does.”
The pound dropped 0.8 per cent to $1.2865 at 9:36 a.m. London time, touching the weakest level since July 6. Sterling tumbled the most on record to a more than 30-year low in the wake of the June vote in favour of Brexit. The FTSE 100 Index added 1.1 per cent and the yield on 10-year gilts slipped one basis point to 0.74 per cent.
Sterling stayed lower after a gauge of UK manufacturing unexpectedly increased.
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