Sunday , April 11 2021

Pound steadies after the biggest drop since 2016

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The pound stabilized after the turmoil on Thursday caused by the political fall of the Breitek plan by Theresa May.

Sterling leaned against the dollar to $ 1,2816 in the absence of further resignations caused by the Prime Minister's proposal.

The pound suffered its biggest decline for two years on Thursday, while actions centered in the UK also experienced pronounced falls.

The shares in the owners and banks continued to languish on Friday.

Pound v US dollar

What happened to the pound?

Despite the fact that the Prime Minister announced on Wednesday that he secured the support of the Cabinet to the project of the Breitek agreement with Brussels, the resignation of Brexit secretary, Dominic Raab, and the Secretary of Pensions and Pensions, Esther McVey,

On Thursday, the pound recorded its greatest volatility since the referendum in June 2016, dropping 1.7% against the dollar and falling 1.9% against the euro.

In the absence of new resignations, the pound stabilized on Friday morning. But stability can not last, analysts said.

"While there is no deal" is still the most likely to be, there is a risk of a spiral of sterling depression that intensifies, "said Ulrich Leuchtmannan, a currency strategist at Commerzbank.

"Sterling volatility has awakened since its 100-year dream and is likely to remain reactive."

James Bevan, the investment director of CCLA Investment Management, told BBC Today that there were some "interesting fundamentals" that affect the pound.

Among them are the slower economic growth in the United Kingdom than the EU and EE. U., Which means that interest rates in the UK can not increase as fast as those in other parts of the world. This makes the pound less attractive for investors.

What is happening to share prices?

During Thursday, the actions in companies that are very exposed to the economy of the United Kingdom saw the biggest falls, being the owners of houses and the banks a great success. Royal Bank of Scotland sank 9%, while Persimmon housing companies, Taylor Wimpey and Barratt Developments dropped 7%.

On Friday, RBS's shares fell 2% more in 218.7p.

Among homeowners, Persimmon and Barrett fell 1% more while Taylor Wimpey dropped 0.5%.

The FTSE 100 little index switched to 7,031.82, while FTSE 250 (generally considered as a closest barometer of the UK economy) rose 12.57 points at 18,674.78.

What do companies say?

The big business had been generally favorable to the Breitek agreement project published on Wednesday.

Warren East, the chief executive of the Rolls-Royce engineering firm, told the Today program that time was running out and that any agreement was better than leaving the EU without an agreement.

"I would like, as a business leader, I would like to get politicians from both sides of the valley to continue and negotiate a practical agreement that will work for the business," he said.

The eyes are in companies such as Rolls-Royce that operate a "just in time" model where parts reach the United Kingdom throughout the EU as they are necessary.

The head of the Cooperative Group warned that the availability of fresh food from both the United Kingdom and abroad could be affected by a non-deal Brexit.

Steve Murrells told BBC Radio 5 that stockpiling was not an option because "there is not enough capacity to do it."

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