Sterling hits a 31-year low against the dollar
Sterling hit a 31-year low of $1.24 on Friday (reaching levels last seen in 1985) as UK prime minister Theresa May continued her hard Brexit rhetoric and gave strong indications that curbing UK immigration is higher on her agenda than preserving UK business and City of London interests.
Sterling also hit a multi-year low against the euro, hitting €1.10. Bloomberg had a very interesting article last week that “Foreigners in London are horrified by May’s immigration vision”. Such rumours are certainly bad news for the currency as a tough anti-immigration stance by the UK government makes it less likely that the UK will secure major free trade concessions from Brussels.
At current levels, it is very difficult to make predictions about sterling’s future direction. Even though the currency looks oversold right now, there is no significant catalyst to drive it substantially higher in the short/medium term as uncertainty about the timing of the UK’s exit and the outcome of its negotiations with the EU remains high. Sterling will continue to remain a highly volatile currency moving into 2017, driven by political news and statements.
