Sterling could soon bounce back

The pound has slid to its lowest level against the euro since 2009. But forex markets are notorious for overshooting and then snapping back quickly.

"The pain can be felt with every British order for croissants and cappuccinos" on the continent, says the Financial Times. The pound has slid to its lowest level against the euro since 2009, with the single currency now buying around 92p, compared to 70p before the referendum in June 2016. And while sterling has recovered some ground against the dollar, in trade-weighted terms tracking a basket of major trading partners' currencies it is close to 2016's record low.

The euro has gained 10% since April, and it has the wind at its back. A sense of political drift and confusion on this side of the Channel, along with some weak recent data, has contrasted with a firmer eurozone economy and unexpectedly stable political environment. There has been talk of a leadership challenge to Theresa May in October, while any prospect of an early election "would put [the pound] under immediate selling pressure", says a Morgan Stanley note. It raises the spectre of a Labour government raising taxes on firms and high earners, which could lead to "substantial capital outflows".

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Andrew Van Sickle
Editor, MoneyWeek

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.