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Sterling hits new lows as Brexit vote continues to affect investor confidence

Published 05/07/2016

The pound has hit a new low against both the dollar and the euro
The pound has hit a new low against both the dollar and the euro

Sterling plunged to new lows against both the dollar and the euro on Tuesday as the UK's decision to leave the European Union continues to batter investor confidence in the country.

The pound plunged to 1.3117 dollars, down 12% since the Brexit vote and hitting a 31-year low. Sterling also fell to its weakest level against the euro since 2013 at 1.1787 euros.

The currency was dented after data showed Britain's dominant services sector slipped back last month as Brexit uncertainty intensified.

The closely-watched Markit/CIPS services purchasing managers' index (PMI) recorded a worse-than-expected 52.3 in June, down from 53.5 in May and below economist expectations of 52.8.

Measures by the Bank of England to help prop up the British economy, which include relaxing funding rules for banks to boost lending by up to £150 billion, failed to buoy the pound.

Lukman Otunuga, analyst at FXTM Research, said: " Sterling was left vulnerable to losses during trading this week following the dismal UK construction PMI for June which rekindled concerns over a possible slowdown in domestic economic momentum.

"This disappointing data comes at a time when the ongoing Brexit uncertainty and global instabilities have exposed the UK economy to downside risks.

"Concerns are elevated over a possible Brexit-fuelled recession and with expectations mounting of a probable UK interest rate cut, pound weakness could be the recurrent theme in the global currency markets.

"It should be kept in mind that the persistent post-Brexit uncertainty has haunted investor attraction towards the Sterling consequently sabotaging any real recovery in value."

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