Pound Slides to Start 2020 With a Reversal of Year-End’s Rally
Pound Slides to Start 2020 With a Reversal of Year-End’s Rally
The pound slid at the start of 2020, halting a winning streak that capped its most successful quarter in a decade.
The currency led losses among peers against the dollar, pulling back after a six-day run that saw it gain 2.5% before the new year. Such reversals are not uncommon in year-end holiday periods, given trading volumes are thin, said Lee Hardman, a currency strategist at MUFG Bank Ltd.
Sterling traders are factoring in the chances that the U.K. won’t be able to negotiate a free-trading agreement with the European Union by the end-2020 deadline, even as the risk of a crash exit from the bloc this month has been lifted. That saw the pound gain nearly 8% in the fourth quarter of 2019, the most since 2009 and making it the best performer among peers.
“Today’s move lower for the pound is mainly just a reversal of the large gain recorded at the end of last year,” Hardman said. “Brexit should be less important as a driver of pound performance in the month ahead. The top tier U.K. data will be important in assessing whether the U.K. economy rebounds in response to a reduction in Brexit and political uncertainty following the election.”
Data released Thursday showed U.K. manufacturing output matching its sharpest downturn in more than seven years in December, with orders for new work from domestic and overseas clients plunging. Further tests for the U.K. economy are due over the coming days, with a similar index for the construction sector due on Friday and then for its dominant services sector on Monday.
The pound traded down 0.5% at $1.3187 by 3:55 p.m. in London, after falling as much as 0.9%. Against the euro, it slipped 0.2% to 84.81 pence.
To contact the reporter on this story: Greg Ritchie in London at gritchie10@bloomberg.net
To contact the editors responsible for this story: Dana El Baltaji at delbaltaji@bloomberg.net, Neil Chatterjee
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