Sterling under pressure on Theresa May’s woes and UK car sales

Sterling fell to the lowest point in nearly a month as reports speculated that UK prime minister Theresa May could face a leadership rebellion from within her own party and new figures showed a slump in UK car sales.

The UK currency declined against all of its major peers, including dropping at one stage 0.5% to 89.2 against the euro.

Traders said that a large part of the slump in the pound was data-driven.

“The UK construction sector has started contracting, according to data out earlier in the week, and today we learnt that new car sales fell 9.3% on the year in September,” said Joshua Mahony, market analyst at online trader IG.

“This recent worsening in key economic indicators is expected to lead to a sharp downward revision in growth forecasts” for the UK, restricting the amount that chancellor of the exchequer Phillip Hammond will be able to allocate in his budget, Mr Mahony said.

New car registrations yesterday appeared on course for their first annual fall since 2011 after a 9.3% tumble in September, a month which normally accounts for around 15% of demand.

Sales were hurt by business and political uncertainty as the UK prepares to leave the EU and confusion over government plans on diesel and petrol cars, which could include new levies or restrictions, the UK’s Society of Motor Manufacturers and Traders said. Sales totalled 426,170 vehicles with demand falling across the board, the society’s data showed, leaving year-to-date registrations down 3.9%.

“This decline will cause considerable concern,” chief executive Mike Hawes said.

“Business and political uncertainty is reducing buyer confidence, with consumers and businesses more likely to delay big ticket purchases,” he said.

Demand has fallen year on year since April due to a combination of factors including an increased vehicle excise duty, weaker consumer confidence and record sales in 2015 and 2016.

“If sterling really has been sold today for fears of a rebellion, that may be short-lived. Tory rebels will likely remember the long game, which is to place all the blame from Brexit negotiation woes on Theresa and move on when 2019 presents itself,” said Nomura International strategist Jordan Rochester

Meanwhile, world stock markets hit fresh highs amid investor optimism over US tax cuts and global economic growth, while the dollar gained as data pointed to solid US growth.

The US trade deficit fell in August as exports of goods and services rose to the highest level in more than two and a half years. Spanish stocks rebounded from heavy losses in the previous session driven by escalating tensions over Catalonia, leading gains across European indices.

Spain’s IBEX ended the session up 2.5%, led by its banking stocks, as worries over Catalonia eased.

  • Bloomberg, Reuters, Irish Examiner


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