Chart of the Month: Sterling at lowest level against dollar since 1985

Chart of the month - sterling

Following last Friday’s EU-Referendum result, sterling suffered a record one-day loss with the pound dropping 8.1% against the US dollar to $1.367. This record one-day decline was almost double the 4.1% fall on Black Wednesday in 1992 when the UK exited the Exchange Rate Mechanism (ERM). This also took the pound to its lowest level against the dollar since 1985.

On Monday, sterling fell sharply again and briefly touched a low of $1.312 before closing one cent higher at $1.3225 at Monday’s close. The peak-to-trough fall from last Thursday night’s high of $1.5018 (after the polls closed) to Monday’s low represented a cumulative two-day decline of 12.6%. This represented the sharpest two-day decline on record.

Sterling has subsequently regained some of its recent losses and at lunchtime today (Thursday) was changing hands at $1.3450.  Looking ahead, a further fall in the value of the pound is anticipated with the prospect of fresh 36-year lows and a move below $1.30.

A fall below 1985 levels is not expected as the low back then was $1.0520. The recent falls will boost price competitiveness for UK goods and services (including tourism) within the US market.  However, the cost of US imports and holidaying within the US will be much more expensive.

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