020 7898 0500Sterling has continued its recent falls, reaching levels last seen in 1985 against the US dollar, and three-year lows against the euro. The confirmation that Article 50 will be triggered by the end of March 2017 is the main reason for this movement since the start of the week. Adding to sterling plight, the Bank of England (BoE)’s Saunders states the majority of BoE members support a cut to effective lower bound interest rate levels before the end of the year. The final meeting for the BoE this year is on the 3rd Nov 2016, where markets will anxiously wait and see if the BoE will cut interest rates further.
Positive manufacturing and construction survey data for September has provided very little respite for sterling as investors have been heavily selling the pound after the timeline for Brexit was confirmed over the weekend. The markets are currently fearing the likelihood of a hard Brexit as it is difficult to see the possibility of achieving a softer exit without notable restrictions when it comes to accessing the single market.
This year’s Tory party conference is quickly turning into a bloodbath for the pound given Prime Minister May’s attitude to leaving the single market, focusing on UK sovereignty and immigration rather the economic fallout of the Brexit. Chancellor Phillip Hammond compounded the issue when he warned the UK economy was heading for a roller-coaster over the coming years, causing more nervousness in sterling markets.
Today we have data released for the key services sector, over 70% of the UK economy, which will be very carefully scrutinized.
