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Pound endures tumultuous trading after reports Philip Hammond could quit

Published 17/10/2016

Sterling was down 0.1% against the US dollar and 0.2% against the euro
Sterling was down 0.1% against the US dollar and 0.2% against the euro

The pound endured a tumultuous day's trading as it came under pressure from reports that Chancellor Philip Hammond could step down after locking horns with MPs over immigration controls.

Sterling was down against the US dollar and the euro in morning trading, after The Daily Telegraph reported that Mr Hammond has been attempting to put the brakes on the Government's "hard Brexit" plans.

But it pared losses by the afternoon, with sterling flat against the US dollar at 1.218 US dollar and 0.2% down against the euro at 1.107 euro.

Kathleen Brooks, research director at City Index, said the pound was behaving like an emerging market currency, with volatile price swings and little sign of stability.

"Although the Treasury has denied that Hammond will quit his post, it doesn't help to instil confidence in the pound," she said.

"The pound is down more than 5% so far this month versus the US dollar, it is also weaker against every other G10 currency.

"To put this month's fall into context, the pound is weaker against the majority of emerging market currencies, including the resurgent Mexican peso, and the Malaysian ringgit. The South African rand managed to eek out a gain versus the pound, even though its finance minister was recently hit with charges of criminal misconduct."

Ben Broadbent, deputy governor of the Bank of England, told BBC Radio 5 Live that sterling's plunge following the Brexit vote had acted as a "very important shock absorber" and allowed the UK economy to adapt.

The FTSE 100 Index was left languishing in the red, closing 0.9% down at 6,947.55, following a lacklustre set of results from Pearson.

Shares in the educational publisher dropped more than 8% after underlying sales fell 7% in the first nine months of the year amid "challenging market conditions".

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