The pound was still reeling today on the back of the election result on Friday. Sterling has lost ground against all currencies today, the chart below is dominated by red arrows showing the pound dropping against all major currencies.
Key pound exchange rates today
GBP to Euro low of the day - 1.1275
GBP to USD low of the day - 1.2636
GBP to CAD low of the day - 1.6852
GBP to AUD low of the day - 1.6959
GBP to NZD low of the day - 1.7550
Moody’s have said that negotiations regarding leaving the EU will now become more complicated and could possibly be delayed and not focus on key issues. According to Moody’s there is also the risk that UK national debt will keep rising for a longer period as the Economy continues to slow down and the backlash against austerity which could be negative for the credit rating of the UK. However, they have also stated that either Theresa May or her successor will now have to steer away from a hard Brexit which could be positive for the UK’s economy.
The chart below outlines exactly why Moody’s is concerned for the UK economy.
S&P waded in on the debate by saying the continued uncertainty for the UK will continue to hurt economic growth. S&P chief economist said today that for the immediate future the outlook remains negative and the outlook for growth is not going in the right direction. He continued to say that, ‘this latest bit of instability can only weaken the business environment and consumer confidence further.
To back this up a report by the Institute of Directors has revealed deteriorating confidence in the UK economy as business optimism has dropped since Friday’s result. The most recent survey shows that 57 percent of IoD members are either very pessimistic or quite pessimistic about the UK economy in the coming year. Only a fifth were optimistic.
Barclays strategist Hamish Pepper said today that their forecasts would be under review since the election result and although they were one of the more bullish of forecasters the risks are now most certainly to the downside for the pound.
Bank of America Merrill Lynch’s Vamvakidis said that Theresa May would now be able to approve a soft Brexit but not a hard.
In the more medium to longer term if it becomes apparent that there could be a softer Brexit then this could bring some support for the pound, however, with the immediate uncertainty sterling will continue to be under pressure.