Sterling slumps to lowest against euro for three years

Sterling fell to its lowest level against the euro for almost three years as the Bank of England restarted its stimulus programme, leaving the UK currency as the year’s worst performer once again.

It fell 0.5% yesterday to 86.4 pence, down from 76.5 pence on the eve of the Brexit vote on June 23.

The UK currency was trading as high as 71.5 pence against the euro this time last year.

The sharp slide will renew fears for Irish exporters across the Irish Sea about the outlook for the currency and their competitiveness.

Analysts have said that hard data and survey evidence have pointed to a slowdown in activity in Irish manufacturing, because of the slump in sterling and amid fears about that the Brexit vote will lead to a recession in the Britain.

Before the Bank of England’s revamped bond purchases started on Monday, sterling had conceded the dubious honour of being the biggest loser among 32 major currencies to the Argentine peso as it rallied from its post-Brexit lows.

The pound is now back below $1.30 for the first time since July as the easy money policies designed to shield the UK economy from the decision to quit the EU take effect.

“There’s hardly a reason to be positive about the pound’s outlook against the background of economic developments, monetary policy and the political outlook,” said Thu Lan Nguyen, a foreign-exchange strategist at Commerzbank, Frankfurt.

Sterling has borne the brunt of the June 23 decision to leave the world’s largest trading bloc, which has spurred contractions in construction and services and sent business confidence sinking to a 4 1/2-year low.

Brexit also spurred the Bank of England’s first interest-rate cut in seven years and prompted officials to increase their gilt-purchase programme by £60bn (€69.8bn) to £435bn.

While the central bank failed to attract enough sellers of longer-term gilts last Tuesday, the purchase operation got back on track a day later.

The pound fell 0.7% during the week to $1.2978 and is down 1.6% against 5the euro. It’s down 12% against the dollar in 2016.

“The UK authorities have always been prepared to allow sterling to take the strain,” said Simon Derrick, chief currency strategist at Bank of New York Mellon in London. “Could you see a move that takes us down another 15% from where we are right now? Yes, easily.”

Economists in a Bloomberg survey predict the Bank of England will cut rates again in November, and predict the probability of Britain sliding into a recession in the next 12 months is at a record 48%.


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