Pound value: Sterling volatile against dollar and euro as Theresa May triggers Article 50

Sterling was recently little changed against the dollar at around $1.2455, having on Tuesday briefly peaked above $1.26

Theresa May announces the triggering of Article 50

The pound fluctuated between losses and slim gains against a slew of currencies on Wednesday as the Prime Minister triggered Article 50, officially kicking off Brexit negotiations and a period of intense uncertainty for financial markets.

Sterling was trading around $1.2410 in late trading in London having on Tuesday briefly peaked above $1.26, a seven-week high, largely as a result of investors selling the dollar on doubts around Donald Trump’s promised tax and regulatory reform.

Earlier in the day the pound fell below $1.24. It was also down sharply against the euro, the Swiss franc and the Australian dollar before recovering somewhat.

Ahead of Wednesday, the pound had oscillated and many strategists agreed that it was hard to predict its course over the next few weeks. Some said that after a more than 15 per cent fall against the dollar since June’s referendum, a hard Brexit scenario is now priced in.

But last week strategists at Deutsche Bank published an updated forecast, predicting the currency could still fall at low as $1.06 before recovering.

Some economists’ forecasts are more optimistic than Deutsche’, but few expect the currency to recover from its post-referendum lows any time soon.

“We’re in for a long period of volatility for the pound and UK assets as the government embarks on protracted and hugely challenging Brexit negotiations,” said Neil Wilson, an analyst at ETX Capital.

“We could see it move lower still if negotiations take a sour turn - $1.10 is feasible,” he said.

Saker Nusseibeh, chief executive of Hermes Investment, likened the triggering of Article 50 "to embarking in a raft or canoe down a very windy and dangerous set of rapids” for markets.

“All we know at present is that the journey is long, the path of the rapids will likely take unusual twists and turns, and that the ride will be turbulent,” he said.

Robert Bergqvist, chief economist at Nordicbank SEB also said that he does not expect to see a substantial rebound in the pound any time soon.

But he also said that “if negotiations should proceed smoothly and show signs of successfully reaching an agreement” then “the pound is likely to appreciate substantially compared to its level today”.

On Wednesday, some traders said that early selling pressure might also have stemmed from the Scottish parliament on Tuesday voting in favour of a second independence referendum.

Separately, on Tuesday Ian McCafferty, the Bank of England rate setter, highlighted a weak outlook for the economy, according to Reuters. He said he did not know if he would vote in favour of increase borrowing costs at the Bank’s meeting in May.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Please enter a valid email
Please enter a valid email
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Please enter your first name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
Please enter your last name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
You must be over 18 years old to register
You must be over 18 years old to register
Opt-out-policy
You can opt-out at any time by signing in to your account to manage your preferences. Each email has a link to unsubscribe.

By clicking ‘Create my account’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in