Sterling slipped to a two-year low against the greenback this week; it remains around 12% below its pre-referendum level. A strong labour market report should have provided support, but the good economic news was eclipsed by the growing possibility of a no-deal Brexit after both Jeremy Hunt and Boris Johnson said they wanted to ditch the Irish backstop.
A general election and a Corbyn government could follow Brexit, which is another key reason the pound is weak. The decline in the pound should really have started to close our external deficit by now, says David Smith in The Sunday Times. Yet the trade deficit in goods widened in the year to May, and the overall current-account shortfall climbed to 5.6% of GDP in the first quarter.
Viewpoint
David Rosenberg, Gluskin Sheff
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