Pound plunges over Brexit turbulence
THE pound slumped to a 31-year low against the dollar yesterday on concerns over the timing of Britain’s planned exit from the European Union, according to traders.
Britain’s currency also struck a fresh three-year low point against the euro, while the drops helped pushed London’s benchmark FTSE 100 stocks index up to a 16-month high beyond 7000 points at the open.
The pound struck $1.2757 – the lowest since 1985 – early yesterday. It traded at 87.56 pence to the euro – its weakest level since 2013.
The currency has been on a downward spiral since Prime Minister Theresa May said Britain will trigger Brexit negotiations by the end of March and her finance minister warned of “turbulence”.
Finance Minister Philip Hammond said during the Conservative Party conference in Birmingham, central England, that people should expect “some turbulence as we go through this negotiating process”.
Mr Hammond, who like Ms May campaigned for Britain to stay in the EU, said that consumer and business confidence could go up and down like a “rollercoaster”.
His comments came the day after Ms May revealed when Britain would start the two-year exit process, putting it on track to leave by early 2019.
The new premier, who took power in July after David Cameron quit following the Brexit vote, also indicated willingness to leave the single market in order to secure control over immigration from the EU.
EU states have signalled they will take a tough line and not offer Britain any special treatment in the talks, warning that membership of the single market would entail allowing freedom of movement.
“It is generally considered that the more May insists on immigration control, the more the EU is likely to close access to the single market,” an analysis by Rabobank Financial Markets Research said.
Britain’s economy has performed more strongly than some analysts expected in the aftermath of June’s surprise Brexit vote.
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.
However, many major employers are reluctant to make long-term investment decisions due to Brexit.
Last week, carmaker Nissan’s chief executive Carlos Ghosn said it was delaying new investment at its giant plant in Sunderland, announcing, “We cannot stay if the conditions do not justify that we stay.”
Mr Hammond is seen as a proponent of a more gradual “soft Brexit” that would retain access to the EU’s single market, while other “hard Brexit” proponents in Ms May’s cabinet want a clean break with the EU.
He has signalled a break with predecessor George Osborne’s goal of eliminating Britain’s deficit by 2019-20 and has not set an alternative timetable for balancing the books.
Mr Hammond is pledging more investment, including the launch of a £3 billion fund to build more than 200,000 new homes. –