A two Euro
coin is pictured next to a one Pound coin on top of a portrait of Britain's
Queen Elizabeth in this file photo illustration shot March 16, 2016.
REUTERS/Phil Noble/Illustration/File Photo
Reuters - Sterling slid
to a three-year low against the euro and a three-month low versus the dollar on
Monday, after a March deadline was set for the start of the formal
process that
will split Britain from the European Union.
Britain's
Prime Minister Theresa May told her Conservative party's annual conference on
Sunday that she was determined to move on with the process and win the
"right deal", in a move to ease fears inside her party that she may
delay the divorce.
Triggering
Article 50 of the EU's Lisbon Treaty will give Britain a two-year period to
clinch one of the most complex deals in Europe since World War Two, and will
redefine the country's ties with its biggest trading partner.
Sterling,
having just posted its worst run of quarterly losses since 1984, skidded more
than 1 percent against the dollar to $1.2845 GBP=D4. That left it less than half
a cent away from the 31-year low it plumbed in early July, shortly after the
shock June 23 vote to leave the EU.
The pound also
shed 1 percent against the euro to hit 87.48 pence EURGBP=D4, its weakest since
August 2013.
"The fact
that May has confirmed the timings for the triggering of Article 50 took away
any lingering doubts and any lingering supportive elements for the currency,
whereby...we could pretend nothing was going on," said UBS Wealth
Management currency strategist Geoffrey Yu.
"Markets
are fundamentally seeing Brexit as negative for the pound... and now we know
it's definitely going to happen, there's more short-term or medium-term risk
for the currency, but how it’s really going to play out remains to be
seen."
Yu added that
sterling's performance over the coming months would be determined by whether it
looked as if Britain would undergo a "hard Brexit" - a total split
from the EU and its single market that some fear could drive an exodus of banks
from London.
Forecasts for
the pound after the vote were almost universally bleak. A number of major banks
predicted a fall to around $1.20, levels not seen since the Plaza Accord's move
to weaken the dollar in the mid-1980s, but it has so far held up better than
that, bottoming out in early July at $1.2798.
"From
(May's) comments it appears that next year it is going to be very volatile and
the British currency may face a large move on any given day especially when it
comes to conceptions and translations about Brexit," said Think Forex
analyst Naeem Aslam.
"A harder
Brexit may punish the currency more, and if the economic data starts to fall
off the cliff, it may actually push the politicians to strike for a softer
Brexit."
DEUTSCHE BANK
SETTLEMENT
Elsewhere,
risk sentiment benefited from news that Deutsche Bank was attempting to
negotiate a much smaller fine with the U.S. Department of Justice, though no
formal settlement has been announced yet.
The DOJ fined
Germany's largest bank $14 billion earlier in September for what it alleged
were sales of toxic mortgage-backed securities.
"I think
the Deutsche headline risk is still there. It's not finished yet, with many
things yet to be revealed," said Kaneo Ogino, director at foreign exchange
research firm Global-info Co in Tokyo. "Cross your fingers that this
rangebound trade continues."
The euro edged
down 0.1 percent to $1.1237 EUR=, remaining well above Friday's low of $1.1153
hit before hopes of a reduced Deutsche settlement pulled it higher.
Reuters.
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