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Pound falls further against the euro and the dollar Pound falls further against the euro and the dollar
(35 minutes later)
The pound has extended its losses against both the dollar and the euro in late trading on Tuesday.The pound has extended its losses against both the dollar and the euro in late trading on Tuesday.
Against the dollar it has fallen more than 2%, at one point dropping below $1.21, while against the euro it fell below €1.10.Against the dollar it has fallen more than 2%, at one point dropping below $1.21, while against the euro it fell below €1.10.
Sterling has now fallen about 19% against the dollar since the UK's vote to leave the European Union, to lows not seen since 1985.Sterling has now fallen about 19% against the dollar since the UK's vote to leave the European Union, to lows not seen since 1985.
One analyst said sterling was "trading like an emerging market currency". One analyst said it was "trading like an emerging market currency".
At one point the pound hit $1.2088 against the dollar on Tuesday evening and against the euro it touched €1.0939.At one point the pound hit $1.2088 against the dollar on Tuesday evening and against the euro it touched €1.0939.
The pound is at its lowest level since Friday's flash crash, when it tumbled to around $1.18 before recovering.The pound is at its lowest level since Friday's flash crash, when it tumbled to around $1.18 before recovering.
Who's afraid of the falling pound?Who's afraid of the falling pound?
Ahmed: The pound's fall and why it mattersAhmed: The pound's fall and why it matters
Viewpoints: How low can the pound go?Viewpoints: How low can the pound go?
Neil Wilson from ETX Capital said the mood around the pound had been incredibly negative in recent days and that it was "now trading like an emerging market currency." Neil Wilson from ETX Capital said the mood around the pound had been extremely negative in recent days and that it was "now trading like an emerging market currency."
He also said the Bank of England comments hadn't helped. He also said comments by a senior Bank of England official had not helped.
A senior Bank of England official said earlier that the pound could still "fall further", but that the recent sharp drop was not an immediate cause for concern. Michael Saunders, a member of the Bank's interest rate-setting committee, said earlier that the pound could still "fall further", but that the recent sharp drop was not an immediate cause for concern.
Bank threatBank threat
The comments from Michael Saunders, a member of the Bank's interest rate-setting committee, were interpreted as a signal that it could keep interest rates lower for longer. The comments were interpreted as a signal that the Bank could keep interest rates lower for longer.
Earlier in the day, some traders had said sterling came under pressure from reports that US banks Citi and Morgan Stanley could move staff outside of London, adding to worries about foreign investment leaving the UK. Earlier in the day, some traders had said sterling came under pressure from reports that US banks Citi and Morgan Stanley could move staff out of London, adding to worries about foreign investment leaving the UK.
"It really isn't terribly complicated. If we are outside the EU and we don't have what would be a stable and long-term commitment to access the single market then a lot of the things we do today in London, we'd have to do inside the EU 27," said Rob Rooney, chief executive of Morgan Stanley International."It really isn't terribly complicated. If we are outside the EU and we don't have what would be a stable and long-term commitment to access the single market then a lot of the things we do today in London, we'd have to do inside the EU 27," said Rob Rooney, chief executive of Morgan Stanley International.
Traders also pointed to leaked documents warning that a withdrawal from the EU single market could cost the Treasury more than £66bn a year as a reason for the drop. Traders also pointed to leaked documents, warning that a withdrawal from the EU single market could cost the Treasury more than £66bn a year, as a reason for the drop.
Analysis: Kamal Ahmed, BBC economics editorAnalysis: Kamal Ahmed, BBC economics editor
Why does the fall of the pound matter?Why does the fall of the pound matter?
On the upside, it matters for exporters which are boosted as their goods are far cheaper on foreign markets.On the upside, it matters for exporters which are boosted as their goods are far cheaper on foreign markets.
It matters for multinational companies like pharmaceutical firms which earn much of their income in dollars. It matters for the tourism industry in the UK, as foreign visitors flock here for bargains and good value holidays.It matters for multinational companies like pharmaceutical firms which earn much of their income in dollars. It matters for the tourism industry in the UK, as foreign visitors flock here for bargains and good value holidays.
On the downside, it matters for tourists travelling abroad who will find everything they buy much more expensive.On the downside, it matters for tourists travelling abroad who will find everything they buy much more expensive.
It matters for the food and fuel this country imports as it becomes more expensive. It matters for inflation, as the rise in import costs feeds through to businesses and the High Street.It matters for the food and fuel this country imports as it becomes more expensive. It matters for inflation, as the rise in import costs feeds through to businesses and the High Street.
And remember, it does not need much of a rise in inflation to wipe out real income growth which at present is running at around 2%. If real incomes start falling, that is when the fall in sterling becomes a truly political issue.And remember, it does not need much of a rise in inflation to wipe out real income growth which at present is running at around 2%. If real incomes start falling, that is when the fall in sterling becomes a truly political issue.
Because the pound in your pocket will actually be worth less.Because the pound in your pocket will actually be worth less.
Read Kamal's blog in fullRead Kamal's blog in full
Meanwhile the economist, broadcaster and diplomat, Peter Jay, who was a civil servant in the Treasury in the early 1960s when Harold Wilson was Prime Minister, told the BBC that the pound has, in effect, been devalued.
"It certainly has been devalued relative to where it was before the Brexit vote," he said. "From the point of view of consumers buying foreign goods, [it] means that they will pay higher prices.
"From the point of view of those kind of economists who believe that a competitive exchange rate is vitally important for full employment and for exports and for economic growth, it will be welcome news."
The falls in the pound earlier pushed the FTSE 100 to an intra-day high, but it closed the session 0.4% lower at 7,070.88 points.The falls in the pound earlier pushed the FTSE 100 to an intra-day high, but it closed the session 0.4% lower at 7,070.88 points.
Many of the companies in the index generate most of their revenues abroad, and a weaker pound means overseas revenues are worth more when they are converted back into sterling.Many of the companies in the index generate most of their revenues abroad, and a weaker pound means overseas revenues are worth more when they are converted back into sterling.
The index broke its last intra-day high from 27 April 2015, when it reached 7,122.74 points, but could not hold on to beat that day's record closing high of 7,103.98.The index broke its last intra-day high from 27 April 2015, when it reached 7,122.74 points, but could not hold on to beat that day's record closing high of 7,103.98.