Brexit: why the pound is under pressure

Brexit: why the pound is under pressure


What’s up with sterling? The short answer
is, it’s falling. The long answer: for months, the
pound has been stuck in limbo. Up a bit here, down a bit there,
waiting for the UK government to say what it really
wants to achieve out of the exit from the EU. Now the country has a new
prime minister, Boris Johnson, and whether you agree
with him or not, he’s at least being clear. The UK is leaving the
EU at the end of October with or without a deal. It’s that second bit, without a
deal, that’s bugging the pound. Ever since the
referendum in 2016, the currency markets
have been clear. At one point, HSBC
was calling the pound the unofficial opposition. Any sign that the UK is heading
for a deal brings a rally. Any sign that it’s
serious about crashing out is met with a drop. A few economists argue that in
the long run the UK is better off out of the EU, but there’s
a very strong consensus – from debt-rating agencies,
from investors, from companies, from economists – that a sharp
deal-free exit would deliver a hit. Sterling, quite simply,
does not like it. So while the new
prime minister is beating the drum for
a no-deal Brexit, the pound has hit the skids. It has slumped to a two-year
low against the dollar, its main benchmark, and
also against the euro. Now this is great
news for the UK stock market, large chunks of which
– in the FTSE 100 at least – derive their earnings
largely in dollars. But it’s a blow for
importers, and it is grim news for anyone packing
up their factor 50 and heading to the Med for the summer. On paper, it’s
good for exporters, but the type of
exports the UK makes and its reliance on
specialised supply chains means it would be hard
for a drop in the pound to soften the blow of crashing
out of the EU with no deal. Just ask PSA,
which has indicated it would pull car production
from Ellesmere Port in Cheshire if a no-deal crash
out did occur. Markets and British
politics are fickle. This drop in the pound
could prove to be a blip, but selling pressure
really seems to be building from a variety
of types of market participants. These are testing times.

Author:

17 thoughts on “Brexit: why the pound is under pressure”

  • Martin Ersatz says:

    And as the British car industry continues to evaporate you still find pro-Brexit retards tossing off about the Brexit dividend that never existed in the first place. Traitors.

  • A fall in Sterling is bad news for anyone who eats, uses transport, or buys imported goods or services. Yeah the FTSE rises but that usually means shares retaining their value or gaining a bit if there earnings are mostly overseas.

    What really cracks me up is ten to twelve years ago the Pound was closer to $2.

  • Good us Yankees are taking bets on how long an island of inbreds starve, coward Brits run from the Iranian Navy like inbreds

  • Leaving the EU with No Deal is not crashing out. It is the opportunity of a lifetime to be free of all the nitpicking regulations, diktats and laws created by The Brussels Mafia PLUS we would no longer have to pay 15.5 billion (net) a year for something we can easily do ourselves – which is govern ourselves.

  • Trump openly like to attack European project why Brits fall for that and even Britain also sacrificed in the process.

  • The UK government can't even manage a trade deal with 27 other members of the EU after 3 years.

    So how is it going to manage trading internationally with 164 members of the WTO?

    Confident ignorance of the facts about the EU propagated by Brexit has caused  people to think they can  undertake  risky acts for which they do not have the skills, talent or know how.

    Lack of self control and an obsession with it's own delusions of economic grandeur will be the UK's undoing.

  • Gerasim Gerasimov says:

    I can’t get what’s the new information here. That looks like pointing something the everyone sees, Why?

  • The pound has been falling gradually for the last 10 years yet the Polish Lithuanian and latvian economy's have gradually been growing it's nothing to do with brexit. But brexit will cure the slump in the pound by stopping cheap labour migrant workers coming here and sending their money out of the country building their own economy's yet devaluating ours BELIEVE IN BREXIT

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