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Traders couldn't make their minds up about the pound
REUTERS/Suzanne Plunkett
Sterling flip-flopped against the dollar all-day on Wednesday.
The pound looked like extending its disastrous run against the dollar and euro on Wednesday morning in London, setting new multiyear lows against both.
After breaking below $1.27 in early trade on Wednesday morning, a level not seen since 1985, sterling briefly poked its head into positive territory, thanks to better than expected service sector PMI data. Losses against the euro were also being pared back.
But then it fell again, before eventually finishing the European day having gained 0.15% on the dollar. Traders clearly couldn't decide what to make of the currency pairing on Wednesday.
Here's how the pound looks against the dollar at 4.50 p.m. BST (11.50 a.m. ET):
REUTERS/Suzanne Plunkett
The red line on the above diagram is the neutral point for the day. As you can see, the pound jumped between positive and negative territory all day.
Why? Well, there's conflicting feelings about sterling in the market. In the short-term, UK economic data keeps beating expectations, which is a boost for sterling. But in the long-term, fears about a looming "hard Brexit" are driving pessimism.
The pounds collapse began after Prime Minister Theresa May on Sunday set a firm date for triggering Article 50, which would begin the official process of Britain leaving the European Union.
Things have not been helped by reports that Theresa May is unwilling to bend to the will of financial services in negotiations, signals that a "hard Brexit" — a complete break from Europe — is the most likely outcome, and an estimate that such a departure would cost the UK £10 billion in lost taxes.
The pound followed a similar pattern against the euro, with the currency getting a boost from suggestions that the European Central Bank could be about to end its bond-buying programme.
Sterling was as low as €1.1315 at one point in trade, but ended up by 0.18% against the single currency. Here's how it looked at 4.50 p.m. BST (11.50 a.m. ET):We're still in
REUTERS/Suzanne PlunkettRegardless of the small upwards moves, we're still in 31-year low territory for the pound against the dollar and 5-year low territory against the euro.
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