Pound falls to 10-week low against dollar as time runs out for Brexit deal and retail sales slump
Brexit fears grow and shops report disappointing sales, sending UK currency downwards
The pound slipped to a 10-week low against the dollar on Tuesday as it fell below $1.27 for the first time since mid-August.
Sterling dropped more than a cent against the US currency as concern built that the government will run out of time to agree a divorce deal with the EU.
Adding to Brexit concerns were disappointing retail sales figures that indicated a significant slowdown in consumer spending in October after a summer splurge.
Sterling fell against all major currencies apart from the yen on Tuesday and was trading almost half a cent lower against the euro at €1.119.
The Budget announcement appeared to have little impact on the pound, perhaps unsurprisingly given that the chancellor indicated that entirely new spending plans would be needed in the event of a no-deal Brexit.
Stocks had a quiet day in London with the FTSE 100 up nine points. Housebuilders including Persimmon were up on the day after the government announced it would extend the Help to Buy scheme.
Thursday’s Bank of England interest rate decision will be the next closely watched event for the pound. Traders are expecting no change but, as ever, the comments of the BoE’s Monetary Policy Committee will be pored over for any hint that another rate rise may be in the pipeline.
The MPC raised rates by a quarter of a basis point to 0.75 per cent in August, only the second time it has increased rates in a decade.
But with unemployment at a four-decade low, there are signs that wages are beginning to rise which could start to push inflation upwards, increasing the likelihood of an interest rate increase.
However, the public spending watchdog on Thursday revised down its estimate of how low unemployment could go before inflationary pressures become too great.
The Office of Budget Responsibility said it now believed that the economy can support 4 per cent unemployment without inflation, rather than 4.5 percent.
It forecast that the jobless figure will continue falling to 3.7 percent this fiscal year, before rising again.
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