Sterling dropped to 87.46 pence against the euro, the lowest level since August 2013, after May gave more details over the weekend about how Britain would exit the European Union.
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This means she kicks off the negotiations process before the French and German elections next year and implies the two-year Brexit clock triggered under Article 50 will wind down by March 2019, a year before Britain’s next general election.
The top flight leapt another 1.2% – or 84.6 points – to 7068.1, near to last April’s record close of 7104, while the FTSE 250 Index reached its highest ever level with stocks buoyed by further falls in the value of the pound.
British Prime Minister Theresa May announced at the weekend that her government would start the process of leaving the European Union within the next six months – possibly leading to Britain severing ties with the single market.
The pound has lost fallen than 15% over the past year, and is now trading way below its recent high of $1.71 set just two years ago.
The pound fell 0.7 percent to $1.27 47 as of 10:30 a.m.in London, and touched $1.2740, the lowest since 1985.
European Union leaders have emphasized that upholding freedom of movement is key to maintaining access to the single market.
Currency experts fear sterling could end up trading between 1.20 and 1.25 against the USA dollar by the end of the year.
At the same time, May had said she would start formal exit talks by March next year, which means the two sides will have scarcely two and half years to work out how their bilateral trade will function on the day after the United Kingdom leaves. “Right now the reaction to Prime Minister May setting a departure deadline is mostly limited to the pound”. The weaker currency has boosted British manufacturing, as Markit/CIPS’ September purchasing managers’ index, released Monday, shows: at 55.4, the sector expanded at its quickest pace since May 2014. Eastern Time. Analysts polled by FactSet are looking for a reading of 49, which would be below the 50 line which indicates contraction. “While politics is king, this is stymieing any chance of a pound recovery”, she said.
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Higher inflation could make it harder for the Bank of England to support the economy going forward, with further rate cuts and stimulus, while making life more expensive for the British. The International Monetary Fund, meanwhile, reduced Britain’s growth forecast for next year from 2.2 percent to 1.1 percent.
