The pound dropped to a three-decade low, as investor concern about Britain’s exit from the European Union welled up after Prime Minister Theresa May’s announcement that she would begin the process of leaving the bloc in the first quarter of 2017.
Sterling fell beyond its post-Brexit-vote low, and was down against 29 of its 31 major peers. During the first day of the Conservative Party’s annual conference in Birmingham on Sunday, May promised to curb immigration and set a date for Britain to trigger Article 50, which starts a two-year withdrawal process. While that removed one risk that’s been hanging over UK businesses, the British Prime Minister failed to provide further clarity on what leaving the EU will actually look like.
The pound fell 0.7 percent to $1.27 47 as of 10:30 a.m. in London, and touched $1.2740, the lowest since 1985. It sank 0.4 percent to 87.62 pence per euro, after dropping to the weakest since August 2013.
The Bloomberg British Pound Index, which measures sterling against other major currencies, has fallen more than one per cent this week to the lowest since the gauge began in 2004.
“We have the market facing the reality that Brexit is about to begin and we could be faced with hard Brexit,” said Jane Foley, a senior currency strategist at Rabobank International in London. There are also reports that “the government may not make any exceptions for the financial sector and that is just lacing the concerns the market already has about the outlook for growth, investment and jobs in the UK economy.”
Declines have extended since May was said to refuse to prioritise the protection of the financial-services industry in negotiations with the EU.
The pound has fallen 14 per cent versus the dollar since the British people voted to quit on June 23, and just completed its worst quarterly run of losses since 1984, with five straight declines. While that move has become a focus of the post-vote angst in the UK, it’s not necessarily bad news for everyone.
The weaker currency may cushion the economy by boosting exporters, and the decline has also buoyed the nation’s stock market, with the FTSE 100 Index surpassing 7,000 for the first time in 16 months on Tuesday.