EU exit: Brexit worries weigh on the pound exchange rate

D.he prospects of a hard Brexit without a trade deal at the end of the year weigh on the pound’s exchange rate. Against the dollar, the British currency fell half a cent on Wednesday to $ 1.293, the lowest level in six weeks.

Against the euro, the pound fell by 0.2 percent to 1.10 euros. Since the beginning of the month it has lost around 5 cents against the dollar and 2.5 cents against the euro. The pound rate had previously risen at the end of August.

After the recent escalation of the dispute over a post-Brexit agreement between London and the EU, analysts see a dwindling probability of a free trade agreement before the Brexit transition period expires at the end of 2020. “The pound depreciation is driven by the resurgence of the no-deal Brexit risks,” said Barclays chief economist Christian Keller. The chief economist of the Fitch rating agency, Brian Coulton, now assumes that WTO tariffs will apply in trade from January.

Bank Unicredit disagrees: “We have a higher forecast of $ 1.35 for the pound sterling in the fourth quarter, assuming a last-minute compromise is reached,” the bank wrote. In the short term, however, the likelihood has increased that the exchange rate will test the $ 1.28 or $ 1.27 mark. UniCredit expects the price to slide before recovering.

The weaker pound helps the share prices of the major international corporations, which are listed in the London FTSE100 index and make about two-thirds of their sales outside the UK. The FTSE100 rose at times by almost 1 percent to 5980 points on Wednesday. The broader FTSE250 index, which includes many companies that do business primarily in the UK, fell half a percent.

This was also due to new concerns about the corona pandemic and possible new lockdown restrictions. The government has set a new limit of six people for private meetings from September 14th. The news of the interruption of the corona vaccination tests by AstraZeneca also depressed the mood. The gastronomy fears a longer crisis. The share price of the pub chain Wetherspoons fell by more than 7 percent, the price of the bookstore chain WHS, which operates stores in train stations and airports, fell by 6 percent.


Related Articles

Back to top button