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Pound’s plunge persists amid concerns

The currency is still near its lowest level since 1985 even as BoE sees the fall as a shock absorber

Gulf News

Dubai: The British Pound has failed to see a much expected bounce-back.

The British Pound weakened further on Monday, still near its lowest level in more than three decades, as ministers prepare to allow Britain to depart from the EU without preferential trading with the bloc — a so-called “hard Brexit”.

Traders have been selling the currency on anticipation of capital outflows from the UK, which has both fiscal and trade deficits, and was the highest recipient of foreign direct investment in Europe.

“The resultant uncertainty and fears of a hard Brexit has stemmed the foreign flow — or at least the expectation of future flow — and that’s why the pound has been exposed,” James Purcell, head of ultra high net worth cross-asset strategy at UBS Wealth Management told Gulf News over email.

The pound fell to its intraday low of $1.2127, losing 0.42 per cent on day, before trading at $1.2157. The currency hit a low of $1.1450 against the dollar earlier in the month, its lowest since 1985.

“We maintain that the economy will continue to suffer in the coming days and the path of least resistance is towards the downside for the pound. The support at $1.18 could be tested any day,” said Naeem Aslam, chief market analyst with Think Forex over email.

Meanwhile, a central bank official expected the weakness in the currency to act as a shock absorber.