Macroscope | The fallout from Brexit has just begun and it’s about to get a lot worse
Spare a thought for investors in the volatile pound sterling.
At one point on Monday, the sterling rose above the US$1.35 level, as it seemed that United Kingdom Prime Minister Theresa May was about to reach an agreement with the European Union on the first phase of negotiations over the terms of Britain’s exit from the bloc.
Yet, as news trickled out that talks had broken down due to opposition to the deal by the May government’s partner, the pro-Brexit Northern Irish party, the pound took a knock, suffering its biggest fall against the dollar in three weeks.
Currency investors have been here before. Having plunged 15 per cent versus the US dollar in the four months following the Brexit referendum in late June 2016, the sterling bounced back this year, shooting up nearly 12.5 per cent between early March and mid-October partly because of growing confidence that Britain and the EU will reach a deal in their divorce.
Over the past several weeks, the pound has bobbed up and down like a yo-yo, as the clock ticks on, anticipating the securing of an agreement on the first round of negotiations ahead of a meeting of EU leaders on December 14-15.
