‘Hard Brexit’ fears push pound to 31-year dollar low

London / AFP

The pound slumped to a 31-year low against the dollar on Tuesday on concerns over the timing and terms of Britain’s planned exit from the European Union, traders said.
Britain’s currency also struck a fresh three-year low point against the euro, while the drops helped pushed London’s benchmark FTSE 100 stocks index up to a 16-month high beyond 7,000 points as British exporters stood to benefit from a weaker pound.
The British economy has showed signs of improvement in the months since the shock vote to leave the EU but there are concerns about the wider long-term impact of the bloc losing its second-biggest economy.
Underscoring the uncertainty, the International Monetary Fund on Tuesday cut its 2017 growth forecast for Britain, blaming Brexit and warned the damage could be greater if negotiations led to trade barriers.
British Prime Minister Theresa May said at the weekend that her government would start the process of leaving the EU within the next six months — possibly leading to Britain severing ties with the single market. The pound on Tuesday struck $1.2740 — its lowest level since 1985.
Sterling meanwhile traded at 87.66 pence to the euro — the weakest level since 2013.
“It seems that it is going to be hard to provide a tourniquet for sterling’s recent wounds given the solidity of the newly announced Brexit timeline,” said Connor Campbell, analyst at traders Spreadex.
“In terms of silver linings, the pound’s protracted demise has continued to lift the multinationals that make up the FTSE 100, leaving the index back above 7,000 for the first time in 16 months.”

‘Worth more in pounds’
The FTSE rallied to a gain of 1.8 percent in mid afternoon deals, compared with Monday’s close.
“The reality is the biggest stocks in the index dominate its performance, and the likes of HSBC, Royal Dutch Shell, and British American Tobacco all have international earnings which are now worth more in pounds and pence thanks to sterling’s decline,” said Laith Khalaf, senior analyst at stockbrokers Hargreaves Lansdown.
In the eurozone, Frankfurt’s DAX 30 stocks index won 0.9 percent compared with Friday’s finish. The DAX was shut Monday for a German public holiday.
Deutsche Bank shares were 3.6 percent higher in midafternoon trades, at 11.85 euros, after last week plunging to historic lows on fears for its financial health.
Elsewhere Asian stock markets rose with Japanese stocks boosted by a weaker yen.
The dollar won support from a rebound for US manufacturing, which helped turn attention back to US monetary policy, days ahead of the release of a closely watched jobs report. Traders took the data as a sign that the world’s top economy is getting back on track and would be able to withstand an increase in borrowing costs.
The Fed had considered a rate hike last month but held off, saying it wanted to see more evidence of strength.
The IMF left its global economic forecasts unchanged into 2017 but called governments to take action against the threats of low growth and protectionism.