Sterling at eight-year low against the euro

Sterling tumbled against the euro as the single currency emerged as the markets’ safe haven of choice when faced with a potential war across the Pacific.

A pound bought €1.0763 late yesterday afternoon, down 0.31pc. At some points it fell below €1.075, matching intra-day lows last seen in October 2009 and approaching the all-time lows experienced at the height of the financial crisis in late 2008 and early 2009. The euro had already performed strongly this summer as economic growth picked up in France, Germany and their neighbours, and on rumours of more quantitative easing.

STERLING tumbled against the euro as the single currency emerged as the markets’ safe haven of choice when faced with a potential war across the Pacific.

A pound bought €1.0763 late yesterday afternoon, down 0.31pc. At some points it fell below €1.075, matching intra-day lows last seen in October 2009 and approaching the all-time lows experienced at the height of the financial crisis in late 2008 and early 2009.

The euro had already performed strongly this summer as economic growth picked up in France, Germany and their neighbours, while economists expect the European Central Bank to lay out plans for rolling back quantitative easing, which will also support the currency.

“The location of the [potential North Korean] conflict and the parties involved make the euro, rather than the US dollar, the preferred safe haven currency of choice,” said Jane Foley, FX analyst at Rabobank.

“The result is further strengthening of the euro exchange rate, with the euro breaking 40 pips through the big $1.20 threshold. Robust economic data from France provided further platform for the lift-off of the euro.” At the same time the dollar has weakened as Donald Trump’s economic promises have not yet come to fruition. As a result sterling has fallen by 8.3pc against the euro since the start of 2017 but has increased by 5.3pc against the dollar over the same period. Meanwhile the UK economy has become more sluggish and traders appear to be waiting for signs of material progress in the Brexit talks before upgrading the pound against the euro. Analysts believe the pound could face a little more short-term pressure before gradually rising again.

“We would need to see an additional layer of bad news to fuel any further politically induced sterling selling. This seems unlikely in the absence of a Brexit disaster situation unfolding – that is a complete breakdown in UK-EU negotiations,” said Viraj Patel at ING.

The weak pound could help exports as it makes British goods more competitive internationally, though there are few signs of this boost coming through so far.