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(SKY NEWS) – The pound has continued its downward slide amid fears of a “no deal” Brexit – nearing a one-year low before making a slight recovery.
Sterling slid to $1.2842 in mid-morning trading, its weakest since 25 August 2017. Just after midday, it recouped some of the previous day’s losses, rising to $1.2888.
While most of the blame for the pound’s tumble has been put squarely on fears of the UK crashing out of the European Union without a deal, analysts have been keen to point out that August has always been a difficult month for the currency.
Viraj Patel, a currency strategist at ING, tweeted: “Brexit no deal risks for sure one factor but worth also noting seasonality effects (August being a bad month for the pound).”
In his accompanying note, Mr Patel explained that trading was light and in the last nine years, sterling has fallen more than 0.5% on seven occasions.
Ed Conway, Sky’s economics editor, also said the pound’s fall was not all down to Brexit: “If anything, it’s as much down to interest rate expectations.”
Last week, the Bank of England (BoE) raised interest rates above their crisis lows for the first time in nearly a decade.
However, BoE Governor Mark Carney warned monetary policy changes needs to “walk not run” – suggesting the cost of borrowing will not rise sharply over the next few years.
But the pound began to move sharply lower after Liam Fox, the international trade secretary and prominent Brexiteer, put the odds of the UK leaving the EU without a deal at “60-40”.
Dr Fox’s comments came after Mr Carney also warned the risk of the UK leaving the EU without a deal was “uncomfortably high”.