Wednesday 21 August 2019

Sterling on slide again after brief 'Boris Bounce' falls flat

  

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Stock image

David Chance

The pound enjoyed a fleeting 'Boris Bounce' yesterday after the unveiling of the new Tory Party leader - before quickly resuming its slump.

Mr Johnson, who has said he is willing to see a no-deal Brexit, takes office as UK prime minister today and runs the risk of a confidence vote in parliament.

He also faces the prospect of more high-profile defections as the October 31 deadline for a Brexit deal looms.

The pound lost 0.2pc yesterday against the euro, which was trading at 89.64 pence, and the risk is skewed to more losses, according to James Smith, an economist at investment bank ING.

He said Mr Johnson will face the same problems as Theresa May did in crafting a new Brexit plan. "We think a general election is increasingly likely - maybe even inevitable - and the pound is likely to come under further pressure," he said.

Mr Smith forecasts the pound will slide to 92p to the euro over the summer.

There is, however, a bullish case for sterling and Mr Johnson, according to Constantine Fraser, an analyst at economic consultancy TS Lombard.

"Brexit has become a US-style culture war, in which substance matters less than the mood of the tribe," he said.

"With a little imagination, repackaging...the 'Boris Bargain' could be made to feel like a very different proposition." He added that this could prompt a sterling rally.

Irish Independent

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