The pound slumped to a 31-year low against the dollar Tuesday on concerns over the timing and terms of Britain’s planned exit from the European Union, traders said.
Britain’s currency also struck a fresh three-year low point against the euro, while the drops helped pushed London’s benchmark FTSE 100 stocks index up to a 16-month high beyond 7,000 points at the open.
While the British economy has showed signs of improvement in the months since the shock vote to leave the EU, there are concerns about the wider long-term impact of the bloc losing its second-biggest economy.
British Prime Minister Theresa May announced at the weekend that her government would start the process of leaving the EU within the next six months — possibly leading to Britain severing ties with the single market.
The pound on Tuesday struck $1.2740 — its lowest level since 1985.
Sterling meanwhile traded at 87.66 pence to the euro — the weakest level since 2013.
“It seems that it is going to be hard to provide a tourniquet for sterling’s recent wounds given the solidity of the newly announced Brexit timeline,” said Connor Campbell, analyst at traders Spreadex.
“In terms of silver linings, the pound’s protracted demise has continued to lift the multinationals that make up the FTSE 100, leaving the index back above 7,000 for the first time in 16 months.”
The FTSE rallied to a gain of 1.6 percent in morning deals, compared with Monday’s close.
“The reality is the biggest stocks in the index dominate its performance, and the likes of HSBC, Royal Dutch Shell, and British American Tobacco all have international earnings which are now worth more in pounds and pence thanks to sterling’s decline,” said Laith Khalaf, senior analyst at stockbrokers Hargreaves Lansdown.
In the eurozone, Frankfurt’s DAX 30 stocks index won 0.7 percent compared with Friday’s finish. The DAX was shut Monday owing to a public holiday in Germany.
Elsewhere Tuesday, Asian stock markets rose with Japanese stocks boosted by a weaker yen.
The dollar won support from a rebound for US manufacturing, which helped turn attention back to US monetary policy, days ahead of the release of a closely watched jobs report.
Traders took the data as a sign that the world’s top economy is getting back on track and would be able to withstand an increase in borrowing costs.
The Fed had considered a rate hike last month but held off, saying it wanted to see more evidence of strength.
“Traders are seeing a number of reasons to be a little cautious this week,” said Oanda analyst Craig Erlam.
“One of the obvious reasons for this is that we will get the US jobs report on Friday which often weighs on risk appetite.”
Pound/dollar: DOWN at $1.2749 from $1.2841 Monday
Euro/pound: UP at 87.61 pence from 87.30 pence
Euro/dollar: DOWN at $1.1167 from $1.1211
Dollar/yen: UP at 102.34 yen from 101.63 yen
London – FTSE 100: UP 1.6 percent at 7,091.76 points
Frankfurt – DAX 30: UP 0.7 percent at 10,586.46
Paris – CAC 40: UP 0.9 percent at 4,494.36
EURO STOXX 50: UP 0.8 percent at 3,023.24
Tokyo – Nikkei 225: UP 0.8 percent at 16,735.65 (close)
Hong Kong – Hang Seng: UP 0.5 percent at 23,689.44 (close)
Shanghai – Composite: Closed for holiday
New York – DOW: DOWN 0.3 percent to 18,253.85 (close)
Oil – Brent North Sea (December delivery): DOWN 41 cents at $50.48
Oil – West Texas Intermediate (November): DOWN 41 cents at $48.40. AFP