Pound sterling slides back below $1.23 as EU leaders meet in Brussels
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Version 0 of 1. Sterling slipped back from two consecutive days of gains on worries surrounding the kind of deal the UK could reach with the EU. The currency came under renewed pressure as EU leaders arrived for their latest summit in Brussels on Thursday with Donald Tusk, the President of the European Council, saying there would be no negotiations with the UK until the Government triggers Article 50. The pound was down 0.37 per cent against the dollar at $1.2241, and 0.13 per cent against the euro at €1.118 in afternoon trading, Chris Beauchamp, Chief Market Analyst at IG, said the latest positive retail figures have done little to strengthen the currency, which continues to watch political developments more than economic data. Fears among currency traders and investors that the UK is heading for a hard Brexit - in which access to Europe's single market would be sacrificed in favour of tighter controls over immigration – send the pound to its lowest level on record last week. Sterling has lost almost a fifth of its value against the dollar since the referendum in June and is the worst-performing currency in the world this year. It has continued to face pressure since a “flash crash” two weeks ago saw it take a 6 per cent hit in two minutes. The pound also hit a new six-year low against the euro on Monday. "Given what we've seen over the last few weeks, politics rather than fundamental data is probably going to be the most important driver," said UBS Wealth Management currency strategist Geoffrey Yu. "And from talking to clients, what's driving sterling at the moment is less short-term data -- people are starting to shift towards what can happen to the inflation trajectory and how's that going to impact the Bank of England outlook." International investor Jim Rogers last week went as far as saying that the value of the pound could go under one dollar within three to four years if Scotland was to leave the UK. HSBC’s forecast was slightly more positive. The bank, predicted the pound will fall to $1.10 against the dollar and hit parity against the euro by the end of 2017. Michael Hewson of CMC Markets said that trying to find a natural level for sterling is going to be difficult in the short term. Hewson said: “Due to the amount of political uncertainty being generated on both sides of the Channel, as both sides dance on the edge of the volcano, in laying out their negotiating positions, which for now appear a long way apart.” |