British pound plummets to two-year low amid Brexit fears
Currency at weakest since April 2017 on disappointing retail sales and fears economy could be set for its worst quarter since 2012
The British pound fell to a two-year low as signs of economic downturn grew in a market increasingly betting that policymakers will have to cut borrowing costs.
Sterling slumped to its weakest level since April 2017 as disappointing retail sales and fears that the UK economy could be set for its worst quarter since 2012 sapped sentiment. The bleak economic outlook is adding to risk factors for the currency, with money markets pricing in a rate cut by the Bank of England next year.
The pound has been hammered in recent weeks amid concern over the UK’s political direction, with a new prime minister set to be announced within two weeks.
Frontrunner Boris Johnson and his rival Jeremy Hunt have refused to take a potentially chaotic no-deal Brexit off the table despite warnings from finance leaders and large chunks of parliament that this would be a disaster.
The UK is set to leave the European Union on October 31, a date Mr Johnson in particular is keen to keep to.
Both men’s preference is to agree a fresh withdrawal agreement with the EU after parliament rejected outgoing prime minister Theresa May’s Brexit deal three times earlier in the year.
However, Brussels has insisted it will not reopen the withdrawal agreement leading to elevated fears a no deal Brexit could happen.
“A general pound malaise has taken us through the lows from Friday,” said Jeremy Stretch, head of G10 currency strategy at Canadian Imperial Bank of Commerce told Bloomberg.
“It looks increasingly probable that second-quarter GDP is likely to be negative for the first time since the end of 2012. With the third-quarter outlook also poor, this will add to debate about the BOE joining the global easing trend.”
Sterling tumbled 0.6 per cent to $1.2443, its lowest since April 2017. The currency also slipped 0.4 per cent to 89.98 pence per euro. The yield on UK 10-year government bonds was little changed at 0.72 per cent, after touching the lowest since September 2016 last week.
Updated: July 9, 2019 06:22 PM