The British Pound Sterling, on Thursday, June 28, crumbled to its lowest since mid-November, as investors fretted that the message to come out of a European Union summit will be that there has been no meaningful progress for months in negotiations on a Brexit deal.
The British currency slid 0.4 percent to as low as $1.3066 in early European trading, its weakest since Nov. 13, Reuters reports.
The lack of progress, combined with a raft of corporate warnings this week about the hit to Britain’s economy if a deal is not agreed soon, has weighed heavily on sterling and lowered expectations of a Bank of England interest rate rise.
The incoming member of the BoE’s rate-setting team, Jonathan Haskel, replaces a relatively hawkish policymaker and this week he signalled a more dovish tone than some expected. Markets are pricing in an 84 percent chance of a single 25 basis point hike by the end of 2018.
EU leaders gather in Brussels on Thursday for a summit from which the outline of a post-Brexit deal was once expected.
But Brexit has been pushed to the bottom of the agenda and investors are expecting only an update on progress for agreeing an arrangement for the future border between Ireland and Northern Ireland and for the future trading relationship between the EU and Britain.
The latest drop means the pound has tumbled more than 9 percent since a post-Brexit referendum high in April, sent lower in part by a resurgent dollar but also by mounting worries about Britain’s economy less than a year before Britain departs the EU.
Against the euro sterling also fell, 0.2 percent to 88.29 pence per euro. It earlier had weakened to its lowest level since early May.
“We have the EU summit and there is always nervousness around Brexit. There are also concerns about no interest rate hikes. That’s all adding up to the negative sentiment,” said Niels Christensen, a currencies analyst at Nordea in Copenhagen.
Britain and the EU have given themselves a deal deadline of October.
Other analysts said the market remained relatively unmoved by Brexit worries, however, because traders remained confident a last-minute deal would be reached.
“The market is only going to get really nervous a few days before the deadline. Until then I do not expect any major momentum for the sterling exchange rates from any Brexit news. As a result today’s World Cup match against Belgium is likely to be of more interest to the Brits than the EU summit,” Commerzbank analysts said.
This week has seen some evidence that Brexit uncertainty is already hitting the economy, with a halving in new investment in the British car industry.