Brexit back-and-forth leaves the pound reeling
British Prime Minister Boris Johnson. Photo: WIktor Szymanowicz/NurPhoto via Getty Images
Why it matters: It's the latest in the litany of Brexit back-and-forth that has left the market reeling and most of Britain uncertain about the future.
What happened: The pound fell nearly 1%, near its lowest level in a year, and is again testing its early August lows when it reached the weakest against the dollar since 1985.
- Sterling has fallen more than 7% in the past 3 months, the worst performance among major developed-market currencies.
The big picture: The British pound also has been hit by a wave of negative data about the U.K. economy.
- Most recently a major manufacturing survey showed the industry is solidly in contraction. The IHS Markit/CPS manufacturing PMI dropped to 47.4 from 48.0 in July, a full point lower than the median forecast in a Reuters poll of economists.
- Britain’s economy shrank overall last quarter, largely based on companies stockpiling goods in advance of the original March Brexit deadline and a slowdown in manufacturing and business output.
- If the economy shrinks again this quarter the country will officially be in recession.
What's next: The combination of Brexit uncertainty and the economic weakness has a growing number of fund managers betting sterling will continue falling until it hits parity with the dollar.
- BlackRock's Rupert Harrison recently said he sees the pound hitting 1-to-1 with the greenback, following a similar parity call from Morgan Stanley in July.