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Pound slides to 5-year low versus euro

Oct 05 2016 11:45
Charlotte Ryan

London - The pound slid to a five-year low against the euro as traders reacted to speculation that Britain is facing a so-called hard Brexit.

Sterling was little changed versus the dollar, after setting a fresh 31-year low earlier, following reports on Tuesday that British Prime Minister Theresa May would not give the financial services sector any special favours in talks to exit the European Union.

Declines this week were sparked by her October 2 remark that the two-year withdrawal process would begin in the first quarter of 2017.

“The reaction to May’s comments has shown us that political events are going to be a focus for investors now, particularly as there are still investors in the market who doubt that they will actually go through with Brexit,” said Thu Lan Nguyen, a foreign-exchange strategist at Commerzbank in Frankfurt.

A deal that prioritizes controlling immigration at the expense of special access to the single market is of particular concern to financial services, which comprise a key industry in Britain’s economy.

May sought to allay investor concerns weighing on the pound in an interview on Sky News on Tuesday, saying she wanted “the best possible deal, the maximum opportunity, for UK businesses to be able to trade with and to operate within that market in the European Union.”

The pound depreciated 0.1% to 88.12 pence per euro as of 11:13, and earlier touched 88.43 pence, its weakest since September 2011. Sterling was at $1.2738, having previously touched $1.2686, the lowest since 1985.

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