Sterling slumps after Brexit timetable outlined
LONDON: The British pound slumped to a three-year low against the euro yesterday in reaction to news that Britain would begin Brexit negotiations by March.
However, better-than-expected British manufacturing data, ironically thanks to recent strong falls for the pound, helped London’s benchmark FTSE 100 stocks index to jump by more than 1.0% in midafternoon trade.
Sterling dropped to 87.42 pence against the euro, the lowest level since August 2013, after British Prime Minister Theresa May gave more details over the weekend about how Britain would exit the European Union (EU).
The pound also slid to a threemonth low of US$1.2846 before recovering against the dollar later in the day.
“The news that Article 50 will be triggered in the not too distant future has caused the pound to slump ... and seen stocks rally,” said XTB market analyst David Cheetham.
British finance minister Philip Hammond vowed yesterday to protect the economy from any turbulence during negotiations to leave the EU. He sought to reassure businesses and consumers that he would act to if needed.
“Throughout the negotiating process, we are ready to take whatever steps are necessary to protect this economy from turbulence,” Hammond told the Conservatives’ annual conference in Birmingham.
The pound has faced severe pressure on currency markets since Britain voted in June to leave the EU – handing a boost to the country’s exporters.
In a key indicator of the strength of the manufacturing sector, the Markit/CIPS UK manufacturing PMI (purchasing managers’ index) rose to its highest level since mid-2014, according to figures out yesterday.
“It is ... apparent that sterling’s marked weakening is giving an important lift to foreign demand for UK manufactured goods,” said Howard Archer, chief European economist at IHS Global Insight.
The pound struck a 31-year low against the dollar in the immediate wake of the Brexit vote, at US$1.2798.
May told her Conservative Party’s annual conference on Sunday that she was determined to move on with the process and win the “right deal”, in a move to ease fears inside the party that she might delay the divorce.
May said she would invoke Article 50 no later than the end of March next year, referring to the EU’s Lisbon Treaty that formally puts the divorce proceedings between the EU and Britain in place.
This means she kicks off the negotiations process before the French and German elections next year and implies the two-year Brexit clock triggered under Article 50 will wind down by March 2019, a year before Britain’s next general election. – AFP, Reuters
An employee counts pound notes at Kasikornbank in Bangkok.