Sterling extends fall below $1.24 on Brexit and economic growth fears

Daniel Fowler
July 19, 2019

Sterling slumped to $1.2408, the lowest level since April 2017.

"Clearly the issues facing the United Kingdom now have not been faced in the last decade or so, even during the global financial crisis, and the potential for the pound to hit the 2016 lows is there", Mellor said.

Sterling plunged to a six-month low against the euro on Tuesday and approached two-year lows against the United States dollar, as the two candidates to be Britain's next prime minister vied to outgun each other on taking a harder Brexit stance.

Estimates for March to May 2019 show 32.75 million people aged 16 years and over in employment, 354,000 more than for a year earlier.

While the pound climbed Thursday, the currency and its volatility had been in decline since Prime Minister Theresa May announced her resignation as party leader in May following her failure to get a deal with Brussels through Parliament.

Contenders to be the United Kingdom 's next leader, Boris Johnson and Jeremy Hunt, take part in the debate "Head To Head" on ITV on July 9, 2019 in Salford, England. With the pound already the worst-performing major currency against the dollar this year, Morgan Stanley were not alone in predicting further falls.

An index that tracks the dollar against the euro, yen, pound and three other currencies .DXY was down 0.08% at 97.315 after touching a one-week high.

By 0720 GMT, the pound was down 0.15% at $1.2386 GBP=D3 .

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Sterling was also steadier against the euro after hitting fresh six-month lows.

Traders' fears seem justified, with Britain's Brexit minister, Stephen Barclay, telling lawmakers on Wednesday no-deal risk was "underpriced".

The backstop, one of Brussels' principal demands in Brexit negotiations, is created to prevent the return of a hard border between EU-member Ireland and British province Northern Ireland.

Measures of expected pound swings over the next three and six months, covering the run-up to and the aftermath of the October 31 Brexit deadline, have surged to the highest among Group-of-10 currencies.

"These are all risks we've known about for months, so it's not new, but there is the need for sterling vol to actually price these risks, which it simply was not doing much of before this week", Nomura strategists told clients.

Poor economic data and signals from the Bank of England that it could cut interest rates instead of raising them as previously expected have also hit the pound.

Speculators increased their net short sterling positions for a fourth consecutive week in the week to July 9 to US$5.69 billion, according to Commodity Futures Trading Commission data.

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