Pound hits new low and there could be worse to come


An economist has predicted further falls for the pound after it sank to a fresh 31-year low against the US dollar.

Sterling slumped below 1.28 US dollars at one stage, more than 15% below levels seen on referendum day, while it also dropped against the euro, falling 1% below Tuesday's closing figure to 1.16, its lowest level since 2013.

And Andy Scott, economist at HiFX, has warned there would be further falls for the pound, predicting a drop to 1.25 US dollars and 1.10 euro.

The fall of the pound in recent months
(Snappa graphic)

He said sterling would suffer as the "economic outlook significantly worsens and the UK awaits political leadership to provide some certainty".

A move by the Bank of England to help prop up the British economy on Tuesday, by relaxing rules for banks to boost lending by up to £150 billion, failed to halt the pound's slide.

Michael Hewson, chief market analyst at CMC Markets UK, said: "Combined with a warning that some Brexit effects were already starting to crystallise and this week's slowdown in recent economic data we've seen a bit of a domino effect in locally exposed sterling assets, as well as risky assets generally across the world."

Bank of England governor Mark Carney
Mark Carney (Dylan Martinez/PA)

Bank of England governor Mark Carney said on unveiling measures to boost lending on Tuesday that the fallout from Brexit was starting to "crystallise", raising concerns over commercial property and buy-to-let investors, as well as the vulnerability of debt-laden households to an economic slowdown.

His assurances that the Bank's plan was working failed to prop up the pound, but offered some comfort to the FTSE 100 Index, which has so far proved resilient. But markets slid overnight in Asia, while European indices were also lower with the Dax in Germany and France's Cac 40 almost 1% lower.

Angus Nicholson, a market analyst at IG in Melbourne, Australia, said: "Mark Carney, almost the only British leader who seems to not be resigning at the moment, emphasised the challenges the UK economy will suffer in the post-Brexit world.

"Carney's speech seems to have initiated the dawning of realisation of the longer-term impact of Brexit for many in the markets."