Sterling runs into BREXIT turbulence
LONDON, OCTOBER 3 – The Sterling slid against all major currencies on Monday following the pledge by British Prime Minister Theresa May to formally start the country’s exit from the EU by the end of March 2017.
The British currency, hit a three-year low against the euro in early trading at €1.1434, as the selloff intensified. It touched the lowest level in seven weeks against the US dollar at $1.2845.
The pound also lost 0.2 percent against the Japanese yen. Markets in China, Germany and South Korea were closed for holidays on Monday.
May’s announcement had “unsurprisingly, been bad news for the pound,” Spreadex financial analyst Connor Campbell told the BBC.
Experts warn fears over Brexit turbulence could cause the pound to suffer further losses in the run-up to Christmas.
On Sunday, the British PM said at the Conservative Party’s annual conference that she’ll invoke Article 50 of the EU’s Lisbon Treaty by the end of March. She also talked about a clean break from the European Union, with full control of immigration and an end to the jurisdiction of the European Court of Justice.
The Prime Minister’s words were interpreted as leading to a ‘hard Brexit’, in which Britain would leave the single market causing significant disruption for the City.
“It seems as if we are heading for a ‘hard Brexit’, as Theresa May revealed that control of immigration is the most important issue,” said Mikael Olai Milhoj, senior analyst at Danske Bank, as cited by the Wall Street Journal. “This implies the UK leaving the single market, as EU leaders have said access to the single market means the UK has to accept free movement of labor,” he added.
Supported by the pound’s weakness and the strong factory data, the blue chip FTSE 100 surged to a 16-month high on Monday, gaining 57 points to 6956.
The FTSE 250 index, which contains more UK companies, was also in positive territory, climbing 129 points.