The pound hit a 3-year-low against the euro on Monday, as Britain’s currency continues to depreciate in the aftermath of the UK’s vote to leave the European Union.
Sterling dropped as low as €1.1555 at around 10:30 a.m. BST (5:30 a.m. ET), breaking past a low not seen since August 2013 when weak economic data suggested that the UK could slip into a so-called “triple dip” recession. By 12:00 p.m. BST (7:00 a.m. ET), sterling has recovered a little bit against the single currency, up 0.01% to €1.1565.
Here’s how sterling’s fall against the euro looks in the long run:
And here’s today’s chart:
Sterling’s fall against the euro seems to be driven by the lack of short-term impact from Brexit on the eurozone economy, which has helped the euro strengthen. Prior to the vote, it had been feared that the economic shock of Brexit could spread across the continent, stunting Europe’s already stuttering growth. But since the vote, the economic divergence between the UK and the rest of Europe is stark.
The eurozone economy is shaking off fears about the impact of Britain’s vote to leave the European Union and has seen “little overall contagion” from the vote, according to the latest PMI data released by Markit a couple of weeks back. Meanwhile, numerous economic surveys in the UK are pointing to a substantial downturn in the country.
Caxton FX analyst Alexandra Russell-Oliver says in an emailed statement this morning: “An already weak sterling has faced additional woes recently due to increased stimulus measures and disappointing data from the UK.”
In the aftermath of the Brexit vote, much attention has been focused on the pound’s huge slide against the dollar. Sterling is around 14% lower against the greenback since the vote, dropping below $1.30 for the first time in 31 years. On Monday, sterling remains well below $1.30, trading lower by 0.01% at $1.2913.
The pound has not been this weak against the dollar since 1985 when Chancellor of the Exchequer Geoffrey Howe let the pound float and the US Fed pushed up the dollar by raising US interest rates above 10% in a drive to stamp out inflation.
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