Sterling down for record 13th day on hard Brexit fears
Latest proposals from under-fire UK prime minister sparks sell-off of beleaguered currency
The pound fell for a record 13th consecutive day against the euro yesterday as UK Prime Minister Theresa May's latest Brexit plans looked close to collapse within a day of being announced.
Sterling is selling off as the political deadlock at Westminister has focused investors on the rising risks of a crash-out Brexit in the autumn.
The plunging pound will put pressure on Irish exporters, especially in the food sector, as well as companies such as Ryanair and Irish Continental Group which depend on business with the UK.
By mid-afternoon one euro was worth 88.23 pence - down from 87.84 at the open. Ryanair lost €0.295 to €10.135 while ICG gained €0.075 to €4.895.
Mrs May has proposed a parliamentary vote on whether to hold a second Brexit referendum, a move that infuriated some leave-voting MPs.
It may hasten her departure as PM, with pro-Brexit Environment Secretary Michael Gove hinting that the bill may not be brought forward as planned, and anti-Brexit MPs failing to row in behind it.
Investec chief economist Philip O'Sullivan said: "It is, however, worth noting that the current 88.2 pence to the euro rate is still quite a way off the lows that have been visited since the UK's vote for Brexit, so it seems the market is pricing in an increasing risk of no-deal as opposed to saying that it believes this is the likeliest outcome."
So far, the concerns over Brexit do not appear to have had much impact on 'hard' economic indicators here like exports, where growth was a robust 12pc in the first three months of this year and trade with the UK performed well.
There have, however, been signs that investments are being delayed until there is clarity over Brexit.
"From an Irish perspective, the 4pc rally in euro/sterling since the beginning of May is unwelcome for Irish exporters, who had enjoyed some brief respite in the first quarter of the year," said Bank of Ireland head of FX trading & strategy Lee Evans. "The increased volatility will be most felt by business sectors with tight margins and high exposure to the UK, and currency risk continues to be one of the main concerns in many business surveys," Mr Evans said.
The Brexit-related weakness of the pound has not just been a one-way street for Ireland, however. Weak sterling has helped keep the lid on inflation as imports from the UK are cheaper.
Ireland's inflation rate started diverging from that of the eurozone in the aftermath of the Brexit vote, when sterling fell 10pc.
That means that Irish workers are getting more bang for their buck from their pay in terms of what they can buy.
Research by the Central Bank showed that the effect of changes in the sterling exchange rate are more important for the price of consumer goods here than the currencies of other trading partners.
But it's bad news for many Irish companies. ICG said Brexit had a negative impact on UK passenger bookings in the run-up to the initial quit date of March 29, a date that has now been extended and could see Britain leave the EU after October 31 - Halloween.
Ryanair, which reported a 29pc drop in profits this week, said that its relatively upbeat guidance for the year was based in part on "no new negative Brexit developments".