Pound's Gain Versus Dollar Masking Broader `Brexit'-Driven Slide

The pound’s third weekly advance against the dollar is masking a broader weakness that pushed the U.K. currency toward the bottom of the pile among its developed-world peers.

While sterling declined against most of its Group-of-10 counterparts this week, it gained versus the dollar, which was undermined by the Federal Reserve’s warning on Wednesday that it will raise interest rates more slowly than previously anticipated.

A day after the Fed meeting, the Bank of England said rates will more likely than not rise in the next three years, damping speculation that some officials were leaning toward a cut -- spurring sterling to its best one-day gain versus the dollar since 2009. Yet against other currencies, the “Brexit Brexit Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Read this Term” debate and the prospect the U.K. will leave the European Union is weighing on the pound. The prospect of Britain leaving the trading bloc is hampering investor decisions, while the BOE warned this week that an exit may hit spending and hold back economic growth.

“Until there is some certainty with regards to the outcome,” the EU issue “will be the canvas people will paint their sterling views on, ” said Stuart Bennett, London-based head of G-10 currency strategy at Banco Santander SA.

“If the BOE is hawkish, one might buy the pound a little bit, if it sounds dovish one might sell a little bit, but all those moves would be constrained” by the prospect of leaving Europe, he said.

The pound was little changed at $1.4491 as of 5:13 p.m. London time, leaving its weekly advance at 0.8 percent. On Thursday, it gained 1.6 percent.

Sterling depreciated 0.3 percent in the week to 77.78 pence per euro, and slid 1.3 percent against the yen and 0.7 percent versus the Swiss franc.

To contact the reporter on this story: Anooja Debnath in London at adebnath@bloomberg.net. To contact the editors responsible for this story: David Goodman at dgoodman28@bloomberg.net, Keith Jenkins

By: Anooja Debnath

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