Sterling’s slide continues as it hits 93p to a euro
Sterling weakened to beyond 93 pence against the euro yesterday – the highest level since 2009 – heaping yet further pressure on businesses here selling into the UK market. The slide, however, also makes imports cheaper.
The euro also crossed the $1.20 mark for the first time since the start of 2015 as investors fled to safety after North Korea fired a missile and amid continued aversion to US political turmoil.
Analysts say sterling’s recent moves against the dollar and the euro have largely been a result of broader shifts in the dollar as investors worry about the ability of the US administration to follow through on its economic agenda.
Financial markets are fretting about the fiscal situation in Washington – deadlines loom in late September and early October on the US budget and the federal debt ceiling.
Brexit, however, and the continued uncertainty surrounding the talks process is also playing a significant part.
Either way, the weakening is a worry for Irish businesses in the tourism, exporting and agricultural sectors.
Tourist figures released yesterday by the Central Statistics Office show that visitor numbers from Britain plummeted almost 4pc between May and June. By contrast, visitor numbers from elsewhere in Europe were up over 5pc during the same period.
Some analysts were wary that the single currency’s renewed strength would attract some attention from the European Central Bank at a policy meeting next week.
“With ECB tapering of QE bond purchases looming on the horizon, ECB board members expressed concern of a possible overshoot of the euro in their July meeting,” said John Moclair, head of global customer group at Bank of Ireland.
“ECB President Mario Draghi will be reluctant to add fuel to the recent euro rally, which may soon generate negative spill-back effects in the form of reduced inflationary pressures in the eurozone. While some would argue that the recent resurgence of the euro is justified by economic fundamentals, it will undoubtedly continue to warrant ongoing attention from the ECB.”
Meanwhile, gold rose to its highest this year after North Korea’s missile launch, boosting haven demand and extending a rally fuelled by declines in the dollar.
An index of precious-metals mining stocks touched a four-month high.
Stocks slumped around the world as North Korea’s ballistic missile test rattled markets.
“Gold prices have rallied to their highest level since US elections” in November, analysts at Goldman Sachs said.