This morning, sterling took a further beating following the botched attempts of Theresa May to convince the European officials ended in a huge disaster.
After an unexpected rejection of the Chequers agreement of the British Prime Minister at Salzburg yesterday, the pound dropped by 0.6 percent lower against the euro and the US dollar, hitting €1.12 and $1.318 respectively.
During the previous week, the currency of the United Kingdom was able to recover following the comments that came from Michel Barnier, the chief Brexit negotiator of the European Union. He seemed to offer a breakthrough on Brexit, with Sterling being able to break the $1.30 mark for the first time in a period of three weeks.
However, the dismissal of the European Union of the flagship Chequers plan of Prime Minister May yesterday drove the pound back down.
Later today, the Dow Jones is set for yet another record-breaking session, with the futures having the index adding approximately 60 odd points after the bell. The move would see it open by above 26700 for the first time ever.
Connor Campbell, an analyst at Spreadex, stated: “The rather abrupt rejection of the infamous Chequers deal by the EU, alongside a brewing Tory rebellion in the UK, has sterling once again mulling over a potential no-deal Brexit, with the added seasoning of a potential Conservative leadership challenge at some point down the road.”
However, after a speech that was delivered by Theresa May this afternoon further accelerated the losses of sterling, with the pound falling from 1.33 against the US dollar at the start of the day to 1.31 after her talk. It also fell from 1.13 to 1.11 against the euro.
The 1.5 percent decline of the value of the pound is its steepest one-day fall in 2018, and it also sent the FTSE 100 soaring by the same amount.
The chief market analyst at IG, Chris Beauchamp, said regarding the decline of the value of the pound: “We are witnessing familiar Brexit reaction in market terms, as a cliff-dive for the pound is matched by a leap higher for the FTSE 100 as the Prime Minister talks tough after her humiliation in Salzburg.”
He added: “Given the steady losses in GBP/USD since April, today’s move could mark the resumption of the downtrend. And for once the FTSE 100 is the star performer among the indices, although given that we are seeing bullish momentum fade slightly after a very healthy week this bounce may be short-lived.”