Pound Slips as May Comments Fuel Concerns About No-Deal Brexit
The pound declined versus the euro for a fifth day after U.K. Prime Minister Theresa May revived the specter of a no-deal Brexit.
Sterling was set for its fourth monthly loss against the shared currency as investors grow increasingly concerned by the prospect of Britain leaving the European Union without a pact on their future relationship. With seven months to go until the nation’s departure, May said that Britain can still make a success of Brexit without an agreement while France is set to draft emergency plans for such an outcome.
“If you listen to the rhetoric of politicians then it does seem more likely, but it does feel a bit like brinkmanship,” said Stuart Bennett, head of Group-of-10 currency strategy at Banco Santander SA in London. “Fundamentally, it can easily be argued that the pound has been oversold, but the uncertainty of Brexit and now this no-deal backdrop implies it could move lower.”
The two sides in the Brexit talks confirmed last week that they would hold continuous negotiations from then on in an attempt to secure a deal, while a U.K. government spokesman said on Tuesday that the country was working toward an October deadline.
A survey by Bloomberg last month found the pound could slump to $1.20 if no agreement was secured, an 8 percent drop from the currency’s level when the survey was conducted, and about 7 percent from the current exchange rate. The poll assigned a 20 percent probability to such an outcome.
The pound fell as much as 0.2 percent against Europe’s common currency before paring the decline to trade at 90.72 pence per euro versus Monday’s closing level of 90.58 pence. It was little changed at $1.2894.
©2018 Bloomberg L.P.