Wednesday 19 June 2019

Pressure on exporters as Westminster deadlock puts sterling in tailspin

Theresa May to stand down
Theresa May to stand down
Donal O'Donovan

Donal O'Donovan

The pound fell yesterday after the collapse of Brexit talks between the main parties at Westminster and signs Prime Minister Theresa May's resignation plans mean an increased risk of a hard Brexit.

Sterling's bruising week will squeeze margins for Irish exporters and is a reminder that Brexit remains a potent threat to the economy here.

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Ulster Bank chief economist Simon Barry said there's little chance of reversing the sterling slump.

"Heightened political tensions and once again very elevated levels of uncertainty mean we think that there could well be further Brexit-related volatility and downside for sterling over the coming days and weeks," he said.

Against the euro sterling fell for a tenth consecutive day of trading to 87.61p. Against the dollar the pound touched a four-month low of $1.2733.

The chance of a hardline Conservative Party leader being elevated as Prime Minister to Downing Street has heightened due to a number of factors. One is a strong showing for the hardline Brexit Party in polls ahead of European elections next week.

The other is the end of talks between Theresa May's Conservative Party and Jeremy Corbyn's Labour that had been aimed at agreeing a joint Brexit stance have, combined with Mrs May's plan to stand down next month.

"What we're seeing is the market pricing in a higher probability of an exit without a deal," Adam Cole, chief currency strategist at RBC Capital Markets.

"It looks increasingly likely she (Theresa May) will be replaced by a pro-Brexit PM with no election, and that automatically increases the chances of a no-deal Brexit."

Irish Independent

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