Thursday 29 September 2016

Sterling recovers from its slump as Brexit concerns recede for now

Published 25/08/2016 | 02:30

By mid-afternoon yesterday, €1 was worth under 85 pence
By mid-afternoon yesterday, €1 was worth under 85 pence

Sterling rose to a three-week high yesterday as data suggested that the British economy has, at least for now, shrugged off the Brexit vote effect.

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For a third day in a row, sterling gained against the dollar and the euro as a report showed consumer credit rose the fastest in almost a decade in July, while business lending also increased.

By mid-afternoon yesterday, €1 was worth under 85 pence.

So far, things in Britain haven't been as bad as people expected", said Marshall Gittler, head of investment research at FXPRIMUS Europe in Cyprus.

"With speculative shorts at a record high, it was only natural that some would close out their positions."

But there is little appreciable difference for Irish exporters, and economists see little real improvement on the horizon.

Friends First economist Jim Power said in his latest economic update that Brexit and its short and long-term impacts are of considerable concern for Ireland.

In the short-term, he said, the key issues include a slowdown in the UK economy and a further weakening of sterling.

"Given all of the unknowns, it is very difficult to be too prescriptive as to what to expect at this juncture. Uncertainty will be the byword for the foreseeable future," he said.

"If the UK does decide to proceed with Article 50, it is not clear what sort of relationship will be negotiated with the EU, but it is clear that if the UK wants access to the EU market, which presumably it will, it would still be bound by many of the regulations and financial commitments that it is in theory trying to break free from."

He said Ireland could benefit from a boost in foreign direct investment.

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