The British Pound Sterling has been trading at its lowest levels against the US dollar following the Brexit vote
Sterling slipped by a cent against the US dollar to below $1.24, its lowest level in a month, before recovering a little. It was also down by a cent against the euro to less than €1.19.
The GBP was lifted in November by signs of a “soft” UK exit from the EU, with talk of a transitional arrangement for leaving appearing to gain ground. However, sentiment towards the pound weakened after developments over the weekend.
International Trade Secretary Liam Fox, seen as a Brexit hardliner, indicated he was open to a transitional deal though was cautious about signing up to too many of the EU’s regulations.
Meanwhile the Financial Times reported that EU Brexit negotiators were insisting that the UK should agree to its divorce settlement before Brussels could offer any transitional deal. Britain’s vote to leave the European Union in June sent the pound to 31-year lows against the US dollar.
The weak pound, which makes imported goods more expensive, has started to feed through to higher inflation – which is expected to push above the Bank of England’s 2% target next year.
Last week the Bank of England said the recent improvement for the pound could mean a milder rise in inflation than it had predicted in November, Sky News reports.
Tension over the nature of Britain’s exit from Europe has seen sterling slip back down after cautious gains seen in November.
