The pound is the weakest performer among G7 currencies, with investors looking askance at stubbornly turbulent Westminster politics. Combined with a wider trend for a stronger dollar, sterling’s recent seven-month highs above $1.32 are looking vulnerable and it is picking up speed heading away from them.
Investors’ confidence in the govenment’s ability to head off the threat of a hard Brexit was cooling, having been lifted by the range of options put forward by prime minister Theresa May last week for the eventual vote on the terms of departure.
The stubborn lack of clarity has persisted since from the House of Commons set a more cautious tone. There was also something of a wake-up call from purchasing managers’ index data from the UK’s dominant services sector. While it was somewhat brighter than forecast, analysts pointed out that it remained sobering.
In afternoon London trade on Wednesday, the UK currency hit a five-day dollar low, down 0.4 per cent at $1.3130. It was 0.2 per cent weaker against the euro, with a unit of the shared currency costing £0.8625, leaving it 0.9 per cent off its strong point against its nearest neighbour, also touched five sessions ago.
There was also a reminder of the potential disruption ahead for the UK from the Bank of England, which outlined plans to hold weekly auctions of euros to ensure banks do not run short of cash in the “significant market volatility” expected in a disorderly Brexit.
Without clearer signs from Westminster that such a risk will be avoided at the end of the month, sterling could remain looking exposed.
