BrexitOct 4 2016

Brexit plan causes Sterling slump and FTSE soar

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Brexit plan causes Sterling slump and FTSE soar

The pound has skidded to a new three-decade low against the dollar as fears grow of a “hard” Brexit.

The pound dropped 0.5 per cent against the dollar this morning (4 October) to $1.2776, its lowest level since 1985.

The latest slide in the value of the pound came after prime minister Theresa May announced on Sunday (2 October) that she would trigger Article 50 by the end of March.

Triggering Article 50 in March should put Britain on course to leave the European Union by 2019.

However the new low for sterling pushed the FTSE 100 index above 7,000 at the start of this morning. 

The FTSE 100 is up 0.65 per cent at the time this article was published to 7,028 – its highest level since June 2015. 

Sterling’s weakness is seen to be a boost for the mainly international blue-chip companies in the index which benefit from stronger foreign revenues as the pound depreciates.

Trevor Greetham, head of asset allocation at Royal London Asset Management, said: “The prime minister’s new mantra can now be read as ‘Brexit is Hard Brexit and we’re going to err on the side of over-doing stimulus.

"Brexit of any kind will be a headwind to growth but policy makers do not know exactly how much of a headwind.

"There is substantial political will behind making a success of Brexit and that means stimulus – fiscal and monetary. Judging from the strong rebound in business confidence, the devaluation of the pound is already having a positive impact on manufacturing.

"With Hard Brexit in the price and economic data surprisingly  positive, we have covered short positions in sterling. We would most likely move overweight sterling assets if the exchange rate takes another leg down.”