Mystery surrounds pound's fall
Brexit and ‘fat finger’ blamed for plunge in sterling
It sank to $1.1491, its lowest point since May 1985. It later recovered and was trading 1.24% lower at $1.2459.
Reasons for the plunge ranged from a ‘fat finger’ mistake – human error – to comments made by French president Francois Hollande about the Brexit talks. There was also speculation that it was a result of automated trading.
One analyst said it an algorithm-driven “flash crash” looked likely, while Mr Hollande’s hard-ball position on Britain’s EU talks was another potential factor.
The currency has endured a rollercoaster week with the UK government’s declared intention to trigger Article 50 on exiting the EU adding to nervousness among traders.
The pound is down 4.6% since Prime Minister Theresa May said the process would begin by March. This followed an earlier announcement to introduce measures to curb immigration which would deny Britain access to the EU’s single market.
Sterling’s fall, together with low interest rates and the benefits of a low pound for those trading with Europe has helped fuel a rise in the London stock market. The FTSE 100 fell 33 points yesterday to 6,999.96 after coming within one point of its all-time high of of 7122.74 on Wednesday.
The prospect of a ‘hard Brexit’ is now taking hold and Chancellor Philip Hammond (pictured) is in the US attempting to reassure the markets that London will continue to have access to Europe.
He told bankers on Wall Street: “One of Britain’s great strengths is the ability to offer and aggregate all of the services the global financial services industry needs. This has not changed as a result of the EU referendum result and I will do everything I can to ensure the City of London retains its position as the world’s leading international financial centre.”
He will attend an International Monetary Fund conference in Washington where IMF boss Christine Lagarde, European Central Bank chief Mario Draghi, German finance minister Wolfgang Schauble and Chinese central banker Yi Gang are among the speakers.
Mr Hammond’s trip comes amid talk of US companies switching their operations from London to Frankfurt, Paris or Dublin.
The Irish capital could be a major beneficiary of the Brexit decision because of the common language, the presence of many US firms already in the republic, and its low corporation tax rate.