FTSE 100 soars as Sterling hits a new 31-year low

Markets are getting serious about Brexit...

FTSE 100 soars as Sterling hits a new 31-year low

Stefan Rousseau / PA Wire

 

The pound has hit its lowest level against the dollar since the UK's vote to leave the EU - helping the FTSE 100 surge to highs not seen since May 2015.

Sterling fell to its weakest mark against the greenback for 31 years early on Tuesday following Monday's reductions which were sparked by the Prime Minister's confirmation of a timetable for triggering the Brexit process.

The pound was as low as $1.27.76 on Tuesday.

Its performance has been closely matched on the FTSE 100, which was up a further 1.6% in mid-morning trading on the back of a 1.2% gain on Monday at 7,095.

Its highest ever intraday level, in April 2015, was 7,123. However, in dollar terms, the FTSE's value remains below its referendum result level.

The FTSE 100's value, in points terms, is aided by a weaker pound as the market's constituents are largely export-dominated multinationals which make the bulk of their sales in dollars.

A weaker pound is also good news for exporters as their goods are more attractive to overseas buyers but it will hurt holidaymakers picking up foreign currency.

Exporters on the mid-cap FTSE 250 helped it reach a record high.

The nature of this week's sterling movement has been largely attributed to announcements at the Tory conference in Birmingham.

Investors fear a so-called 'hard Brexit' with the UK losing access to the European single market as part of plans to clamp down on immigration.

Kathleen Brooks, research director at Forex.com and City Index, said: "Phillip Hammond, the UK's new Chancellor, didn't help the pound either when he suggested that George Osborne's fiscal rules will be abandoned and Government spending increased.

"This is designed to cushion some of the blow from the UK's departure from the European Union.

"However, it is likely to weigh on the UK's already large budget deficit, which is another blow to the pound at the start of the new quarter."

 

Reporting by IRN