Pound slumps to 168-year low
Some ground recovered on UK prime minister’s decision to hold debate on ‘hard Brexit’
The effective exchange rate has broken fresh ground as the pound has fallen to new 31-year lows against the dollar on the back of Brexit jitters. Photograph: Chris Radburn/PA Wire
By any measure, the pound is having a bad time.
According to a trade-weighted index measuring sterling against a basket of its trading peers, the pound has now slumped to its lowest on record, stretching beyond the introduction of free-floating exchange rates in the 1970s and all the way back to the mid-1800s, according to data compiled by the Bank of England.
The pound’s effective exchange rate, which is weighted to reflect the UK’s trade flows, hit a low of 73.38 on Tuesday – weaker than the depths hit during the financial crisis, Britain’s ejection from the European Rate Mechanism in 1992, and its decision to leave the Gold Standard in the 1930s.
The effective exchange rate has broken fresh ground as the pound has fallen to new 31-year lows against the dollar on the back of Brexit jitters. It slumped as low as $1.2117 in late US trading on Tuesday.
According to the Bank of England’s current formula for the trade weighted index – last rejigged back in 2006 – the biggest contributing weights to the basket are Germany (22.5 per cent), US (16.5 per cent), France (12.6 per cent), Italy (8.3 per cent) and Japan (7 per cent ).
Sterling regained some poise on Wednesday after prime minister Theresa May said she would to hold a parliamentary debate on the UK’s exit proceedings, denting expectations of a “hard Brexit”.