Sterling drops below post-Brexit vote low to its weakest since 1985
Sterling has dropped this morning to its weakest since 1985, dipping by 0.5 per cent to $1.2779.
The pound has been in decline since Prime Minister Theresa May announced the timetable for Brexit negotiations over the weekend, and plunged even further this morning. Sterling has also been pulled down by concerns over the possibility of a "hard" Brexit, which would see the UK give up access to the Single Market in return for control over immigration.
(Source: Bloomberg)
The weaker pound has proved a boon for the stock market, with the FTSE 100 opening above 7,000 today. The blue-chip index was heading towards the psychologically significant mark yesterday, closing at 6,983, as international companies enjoyed a boost to foreign revenues.
"The Tory party conference is turning into a sell for the pound, as FX traders get spooked by May’s apparent sanguine attitude to leaving the single market, preferring to focus on immigration and UK sovereignty rather than the economic fallout of Brexit," said Kathleen Brooks, research director for Forex.com and City Index.
"Phillip Hammond didn’t help the pound either when he suggested George Osborne’s fiscal rules will be abandoned and government spending increased. This is designed to cushion some of the blow from the UK’s departure from the European Union.
"However, it is likely to weigh on the UK’s already large budget deficit, which is another blow to the pound at the start of the new quarter."