After a disastrous week that saw the pound repeatedly mark new 31-year lows against the dollar, sterling is falling against the greenback again on Monday morning.
If you discount Thursday night’s “flash crash” — which was reportedly so bad because of low liquidity — there is still a clear downward trend for sterling, with no clear sign of the bottom. Here is sterling against the pound across the last week:
HSBC’s chief currency strategist David Bloom said in a note last week that he expects the pound to reach $1.20 by the end of the year and warns the currency has become a political football for “vigilante” currency traders.
The fall in sterling began after prime minister Theresa May set a firm date for triggering Article 50, which would begin the official process of Britain leaving the European Union.
Things have not been helped by reports that Theresa May is unwilling to bend to the will of financial services in negotiations, signals that a “hard Brexit” — a complete break from Europe — is the most likely outcome, and an estimate that such a departure would cost the UK £10 billion in lost taxes.
FXTM Research Analyst Lukman Otunuga says in an email on Monday morning:
“Friday’s market shaking Sterling flash crash still has a firm grip on the GBPUSD with bears enforcing downside pressure. The sharp decline last week made it increasingly clear that Sterling was already under immense pressure from persistent Brexit anxieties with talks of a hard Brexit haunting investor attraction towards the currency further.”
The pound is also falling against the euro on Monday but not as badly. Here’s how it looks at 7.25 a.m. BST (2.25 a.m. ET):