Pound price against dollar: Pound on longest losing streak against dollar since 2008

Luke
MacGregor/Reuters

• If the pound ends Wednesday lower, it will have seen
  its longest losing streak since the financial crisis.
• It will have dropped for 11 consecutive days against
  the dollar.
• Factors hitting sterling include the rising risk of a
  no deal Brexit and the currency crisis in Turkey.
• The bad news for investors and Brits going on holiday
  is that things don’t look likely to get better any time
  soon.
• 
  You
  can track the pound on Markets Insider.
  

LONDON — The
pound is headed for its longest losing streak against the
dollar since the depths of the financial crisis as a perfect
storm “unravels” the UK’s currency.

After a strong start to 2018, the pound has slumped in recent
months and is trading below $1.27 for the first time in 14 months
on Wednesday. Sterling hit a low of $1.2669 during mid-morning
trade.

If the pound remains at this level, it will mark 11 consecutive
days of losses against the dollar. That would be a run not seen
since 2008 during the depths of the global financial crisis.

“The pound seems to be unraveling against the US dollar due to
a confluence of factors,” ING currency strategist Viraj
Patel told Business Insider on Wednesday.

The
pound has dropped more than 6% against the dollar since the start
of the year.
Markets
Insider

Patel identified three separate drivers of recent weakness:
first, the continued uncertainty around whether or not Britain
will secure a Brexit deal; second, the fact that August is
generally a weak month for the pound; and third, geopolitical
concerns, particularly around trade wars and the growing crisis
in Turkey.

On the first point, a ‘no deal’ Brexit is seen almost universally
as a substantial negative for the UK economy and, by extension,
the pound. If Britain can’t secure an agreement with the EU on
post-Brexit trading arrangements by next March, the UK will crash
out of the EU and trade between the two could slow or stop.

The likelihood of a no deal Brexit appears to be rising, with UK
Trade Secretary Liam Fox recently saying
there is a 60% chance of it happening.

Foreign Secretary Jeremy Hunt said this morning there would be a
sharp fall in the pound in the case of a no deal outcome. In late
July, Thu Lan Nguyen, a currency strategist at Germany’s
Commerzbank warned that
the pound would likely suffer losses similar to the night Britain
voted to leave the European Union.

“I would anticipate at least a reaction to the extent we saw
after the referendum,” she said.

Until there is at least a little clarity on a post-Brexit trade
deal, the pound is unlikely to rally much.

But that story is not particularly new and Patel believes global
uncertainty has played as much — if not more — of a role in the
renewed slump of the pound over the last few days.

“While there’s the obvious Brexit story, the recent move lower
has been a global move,” he told Business Insider, adding: “Broad
emerging market turmoil is spilling over into a strong US dollar
— especially against European currencies.”

Emerging market currencies have seen a big downward spike in
recent days, spurred by the crisis in Turkey where the lira lost
25% of its value in just a week.

The lira’s initial slide came amid rising tensions
between the US and Erdogan over trade. US President Donald Trump
authorized increased tariffs against Turkey on Friday in response
to Turkey’s unwillingness to release an American evangelical
pastor, Andrew Brunson.

“The pound, therefore, has two sources of risk premia,” Patel
added. “Domestic Brexit and global political uncertainty. Both
are at the highest they’ve been for a while now — making the
pound particularly vulnerable.

“We don’t see either fading anytime soon,” Patel said. “The
momentum in pound weakness is too hard to fight.”