World Economy

Sterling Slips Back Below $1.22

Sterling Slips Back Below $1.22Sterling Slips Back Below $1.22

Sterling slipped to a four-day low under $1.22, hurt by expectations that Britain’s economy is likely to suffer from a hard-line stance by the European Union in negotiations on the country’s exit from the bloc.

rime Minister Theresa May, who is in Brussels to attend her first EU summit since Britain’s vote to leave the bloc in June, tried to reassure EU leaders over Brexit but was told by French President Francois Hollande to prepare for tough talks, Reuters reported.

Sterling had been trading just above $1.22 for most of the European trading session, but fell to as low as $1.217 after US traders arrived at their desks. By 1410 GMT Friday it was trading at $1.219, down 0.5% on the day.

The pound has fallen nearly 18% since the June vote with losses accelerating in October after May raised the specter of a “hard” Brexit, where the government will negotiate for an exit that favors tighter immigration controls over free trade, likely curbing foreign investment needed to fund Britain’s huge current account deficit.

Sterling’s slide has sent inflation expectations soaring, driving investors to reassess chances of further easing by the Bank of England this year. It also led some analysts to say that foreign investors were demanding an extra premium before buying gilts.

Britain’s 10-year gilt yield was little changed in early trade at around 1.09%, holding below roughly four-month highs hit on Monday at 1.22%.

Against the euro, the pound was flat at 89.185 pence. The single currency had been hurt on Thursday by European Central Bank chief Mario Draghi’s comments, as he quashed speculation that the ECB was considering how to wind down bond purchases.

“The euro is still licking its wounds after the ECB announcement where Draghi made a forceful statement against any tapering,” said analysts at RBC Capital Markets.


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