Thursday 16 August 2018

Pound tumbles as Brexit jitters and strong US inflation data take their toll

The pound was down more than 0.9% versus the US dollar at 1.403 and was trading lower by 0.2% against the euro at 1.136.

Prime Minister
Prime Minister

By Kalyeena Makortoff, Press Association City Correspondent

The pound took a tumble against the dollar on Monday as Brexit jitters knocked the UK currency and strong US inflation data buoyed the greenback.

Sterling had been making strides against the US currency over the past week to push past 1.43, but started to lose ground over the weekend.

Those declines extended on Monday when the pound was down more than 0.9% versus the US dollar at 1.403 and was trading lower by 0.2% against the euro at 1.136.

David Madden, a market analyst at CMC Markets UK, said: “GBP/USD is under pressure and the US dollar is recouping some of the ground it lost last week.

“The lack of major economic news from the UK today has made traders focus on politics. There continues to be concerns that Brexit talks are not going according to plan, and chatter about Tory rebels doing the rounds is also undermining Prime Minister May’s position.

“Some of the sell-off in sterling can be attributed to Downing Street worries.”

Those effects were compounded by the US personal consumption expenditures price index (PCE), which showed a 0.2% rise in monthly inflation in December, pushing the dollar higher.

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The weaker pound failed to boost the FTSE 100, which tends to benefit when foreign currencies are stronger.

London’s blue chip index ended the day up just 0.08% or 5.99 points at 7,671.55.

However, it fared better than European peers including the French Cac 40 and German Dax which ended the day down 0.14% and 0.12% respectively.

Brent crude prices tumbled around 1.5% to about 69.42 dollars per barrel, as the strengthening American currency made the commodity more expensive for international traders.

But commodity giants were among the best performers on the FTSE 100, with Glencore up 13.1p at 415p, Rio Tinto up 82p at 4,024.5p, and Anglo American up 21.4p at 1,756p.

Mr Madden said: “Even though underlying commodity prices haven’t been too impressive today, the companies involved in those industries are in demand today.

“We have seen multi-year highs being reached in oil and platinum recently, and copper and palladium have been robust too, and this is playing into the natural resources stocks.”

GKN dropped 4.1p to 431.9p as the company said it would have to pump more cash into its pension fund if Melrose’s £7.4 billion takeover tilt is successful.

It said the turnaround specialist’s offer would saddle the business with a higher debt burden, which could have “implications” for the amount of money needed for the pension scheme.

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GKN

Superdry slipped 22p to 1,776p after co-founder Julian Dunkerton offloaded a chunk of shares in the fashion retailer amounting to 1.23% of the group, helping him bag £17.8 million, following 12 months of share price gains.

Mr Dunkerton still holds 25.36% of the company and remains Superdry’s largest shareholder.

Petra Diamonds plunged more than 18% or 14.6p to 64.15p after lowering production forecasts and confirming that the stronger South African currency would knock annual underlying profits by between 10% and 15%.

The biggest risers on the FTSE 100 were Glencore up 13.1p at 415p, Rio Tinto up 82p at 4,024.5p, Carnival up 80p at 5,020p, and BAE Systems up 9p at 588.4p.

The biggest fallers were Severn Trent down 39.5p at 1,970.5p, Old Mutual down 3.9p at 236.4p, United Utilities Group down 11.8p at 736.2p, and British American Tobacco down 64p or 4,875p.

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