- The pound experienced a week of volatile swings.
- A pattern likely to be repeated several times throughout the third quarter as Brexitweighs on the economy and prompts further easing from the Bank of England.
- While above the Monday trough of $1.3118, its lowest level in 31 years, currency analysts are united in the belief that the pound is heading lower in the coming weeks.
- Sterling’s renewed fall in the wake of Thursday’s speech by Mark Carney, in which the Bank of England governor delivered an uncompromising assessment of Brexit’s impact on the economy and signposted monetary easing, graphically illustrated how any rallies are liable to be snuffed out every time negative data or commentary emerges.
- Key to how far sterling falls is the post-Brexit shape of the UK economy and its relations with trading partners, particularly Europe.
- If Brexit looks to be smelling like the UK remaining in [the EU] in all but name, there’s little chance that sterling would get to $1.25.
- The flipside was the hawkish tone of Tory leadership frontrunner Theresa May on immigration which pointed to problems for the UK in maintaining access to the single market should she become prime minister. That looks a lot more like a hard Brexit, and that’s more negative for sterling.
- The two key dates on the horizon are the BoE’s monthly policy meeting on July 14, which Mr Carney signalled may decide to cut interest rates, and September 9, when the new leader of the ruling Conservative party is named.