Brexit knocks the pound ever-so-lower

The pound tumbled against all of its Group-of-Ten peers yesterday, touching an eight-week low versus the dollar, after UK Prime Minister Theresa May got the goahead to trigger Brexit.

Sterling had a delayed reaction to the news, which came out late on Monday in London. Investors had been reluctant to sell the pound during Tokyo trading hours as markets were quiet before the Federal Reserve policy decision today, said Masashi Murata, a currency strategist at Brown Brothers Harriman.

The pound has been one of the major victims of the UK’s vote to exit the European Union (EU), and has fallen about 19% versus the dollar since the June referendum. Sterling has also shown a propensity to drop after new developments in the Brexit process, even if they have been expected.

“Now that parliament has cleared the way for Theresa May to trigger Article 50, there is a realisation in the market that the UK government is on the edge of potentially difficult negotiations with the EU regarding Brexit,” said Jane Foley, a senior currency strategist at Rabobank International in London.

“This could unleash a whole new catalogue of uncertainty about the UK’s future relationship with the EU, much of which could be detrimental to investor confidence.”

Sterling fell as much as 0.9% to $1.2110 (R15.96) yesterday, its lowest since January 17, the day May outlined her Brexit plans that would prioritise regaining control of laws and immigration at the cost of losing access to the bloc. – Bloomberg

This could unleash a whole new catalogue of uncertainty about the UK’s future relationship with the EU.

Jane Foley Senior currency strategist at Rabobank International in London