Pound steadies after slump

10:33 • 13.10.16
Economy

The pound has recovered some of its recent losses, with analysts attributing the gains to the promise of a Commons debate on the Brexit process, BBC News reports.

The pound closed 0.6% higher on Wednesday at $1.22. Against the euro, it rose nearly 1% to close at €1.11.


But the gains could prove short-lived. In Thursday's early Asian trade, it fell to $1.21 again.


Sterling's current slide began when Prime Minister Theresa May named a date for the start of the Brexit process.


On 2 October, she said the UK would trigger Article 50 of the Lisbon Treaty by the end of March 2017.


Traders have been selling the pound, fearing the impact of leaving the single market.


According to figures from the Bank of England, on Tuesday the pound fell to its lowest level in history on a trade-weighted basis.


The trade-weighted index measures the pound against a basket of currencies, adjusted to reflect the importance of nations as trading partners.

 

MPs have been demanding to scrutinise the eventual plan to leave the European Union before it is finally agreed, and on Wednesday the government agreed there should be a "full and transparent debate".

But it added that the process should not "undermine" the government's negotiating position.


"After weeks of tough rhetoric pushing sterling into a trading environment closer to an emerging market currency, the government may aim to stabilise markets, with its rhetoric and suggestions now possibly shifting in tone," said Morgan Stanley's head of currency strategy, Hans Redeker.


"However, there is a fine line to walk as [Mrs] May's Conservative Party wants a clean split from Europe.


"In addition, giving in too much, even before Article 50 negotiations have started, shifts the negotiation advantage towards the EU. Hence, the pound's rebound should be limited and followed by a decline," he added.

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