UK pound coins plunge into water in this illustration
picture, 26 October 2017 – Reuters
LONDON (Reuters): The pound dropped to a 20-week low against the euro on Tuesday amid weak UK data and growing fears of a disruptive Brexit weighing on the currency.
The pound has dropped for four straight weeks, hit by concerns that Britain will crash out of the European Union on 31 October without an agreement on the terms of its departure.
Sterling remained just above five-month lows on Tuesday, trading flat on the day around $1.2669. Against the euro, it fell 0.2% to 88.92 pence, a four-and-a-half-month low. US President Donald Trump, who arrived in Britain on Monday, has backed Brexit hard-liners such as Boris Johnson and Nigel Farage. On Tuesday, he will meet with Prime Minister Theresa May and attend a dinner that may include Brexit backers like Johnson.
May is quitting, and nearly a dozen candidates are vying to replace her as prime minister. Johnson, the bookmakers’ favourite, says the UK should leave the EU on 31 October without any agreement.
“The pound is set to continue depreciating, but the rise in sterling risk premium and short speculative positioning now suggest a slower pace of depreciation,” said Petr Krpata, Chief EMEA FX and Interest Rate Strategist at ING.
Short positions on sterling are at their highest since 17 March, according to the US Commodity Futures Trading Commissions, reflecting uncertainty on Britain’s economic outlook.