Pound becomes worst-performing currency in the world this month due to Brexit

Last, behind 150 peers, including the Romanian Leu and Colombian Peso

Marianna Aragao
Monday 31 October 2016 12:38
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The pound is the worst performing currency in the world against the dollar
The pound is the worst performing currency in the world against the dollar

The pound is the world’s worst-performing currency this month, trailing behind about 150 peers, as the first signs of how Brexit will look emerged in October.

Sterling headed for its biggest monthly decline versus the dollar since the UK voted in June to leave the European Union amid speculation that the government is headed for a so-called hard Brexit, where unfettered access to Europe’s single market is sacrificed for immigration controls. The pound dropped after political headlines and comments from lawmakers and central-bank officials underlined its vulnerability as concern about Britain’s exit from the world’s largest trading bloc intensified.

“This month has all been about hard Brexit concerns coming to the forefront,” said Viraj Patel, a foreign-exchange strategist at ING in London. “It’s typical for a currency trading under heightened political uncertainty to be vulnerable to new news, either good or bad, and this will be an ongoing factor until we get clarity” over the nation’s future relationship with the EU, he said.

What does the falling pound mean for you?

The pound was little changed at $1.2174 as of 10:08 a.m., headed for a monthly decline of 6.2 per cent, the most since June, when it plunged 8.1 per cent. Sterling has fallen every month since April, cementing its position as the worst-performing major currency this year, having weakened more than 17 per cent.

The Bank of England is due to make its interest-rate decision and publish its quarterly inflation report on Thursday amid speculation that Governor Mark Carney may announce a decision on his future at the central bank. Speaking to a House of Lords committee last week, Carney deflected questions on whether he plans to serve a full eight-year term as governor through to 2021, or leave in 2018 as he originally planned.

Swaps signal a less-than 3 percent probability of a rate cut when the central bank announces its policy decision on Nov. 3. The inflation report follows data last week that showed U.K. growth slowed less in the three months through September than analysts predicted, the first quarterly figures since the June vote to leave the EU.

Bloomberg

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