The pound fell against the U.S. dollar on Monday, after it was claimed that British Prime Minister Theresa May will signal plans to quit the EU single market.
The UK currency fell as much as 1.6 percent to a low of $1.1986, a level last seen during October’s flash crash, when it briefly hit $1.18. During that crash the pound plunged to its lowest level against the dollar for 31 years. The pound also hit a two-month low against the euro, falling to 1.13 euros before edging up again.
The pound had recovered to above $1.20 by the close in London.
The currency has fallen 20 percent against the dollar since the nation decided to leave the EU in June’s referendum. Much of that volatility has been caused by the uncertainty about the economic impact if the UK gives up its tariff-free access to the EU.
The Prime Minister will bring to light her strategy in a major speech tomorrow, regardless of reports she will confirm Britain is leaving the EU single market.
“[It is] a bit like the monster behind the door – tomorrow’s speech may not be quite so frightening when we hear it. It would be a tentative buyer of sterling at these levels,” said Ian Johnson, strategist at 4Cast-RGE consultancy.
The pound fell against all major currencies, except the Turkish lira, which is jeopardized due to investors’ concerns over the political future in Turkey.
Winners and losers from a weak pound
The value of the pound is influenced by numerous factors, including growth, interest rates and inflation.
A weaker pound is a huge advantage for foreign tourists, as they flooded the UK in the summer after the big post-Brexit sterling drop. As for the exporters, they now have more competitive goods to sell.
The losers are Brits going abroad, since they can afford less in exchange for their currency. Foreign companies exporting to UK are also losers from a weak pound, along with foreign workers in UK.