Markets

Sterling falls to two-week lows on renewed no-deal Brexit worries

UK financial watchdog investigating audio feed of market-sensitive press conferences to high-speed traders

Sterling has giving up all its post-election gains on fears Britain may still leave the EU without a trade deal at the end of next year. Photograph: Getty Images

Thu Dec 19 2019 - 18:11

Sterling hit two week lows on Thursday after giving up all its post-election gains on fears that Britain may still leave the EU without a trade deal at the end of next year.

The Bank of England kept interest rates on hold on Thursday, saying it was too soon to gauge whether UK prime minister Boris Johnson’s election victory would lift the Brexit uncertainty that has hung over the economy.

Prompted by fears the country’s job market is deteriorating, two of the Bank of England’s nine policymakers voted to cut borrowing costs for a second month in a row.

The pound fell following the meeting, touching a two-week low below $1.30, far below the $1.35 peak hit following last Thursday’s election. Against the euro it was down 0.5 per cent to 85.39 pence.

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Citing ongoing Brexit risks and bleak global growth, Commerzbank FX strategist Ulrich Leuchtmann said markets seemed to believe that the bank would have "to ease its monetary policy anyway in 2020 and perhaps even relatively early in 2020".

"If political uncertainty does increase in the UK, both business and consumer confidence can be expected to be impacted," said Jane Foley, senior currency strategist at Rabobank. "Consequently, the market is likely to conclude that the probability of a dovish Bank of England in 2020 will also increase."

Separately, the UK’s financial watchdog said it was investigating the revelation that an audio feed of the Bank of England’s market-sensitive press conferences was supplied to high-speed traders seconds before the events were more widely broadcast.

Following a rapid internal investigation the central bank confirmed what it called a "wholly unacceptable" use of its back-up audio feed of press conferences by a third-party supplier, which it has refused to name, citing legal reasons. It referred the matter to the Financial Conduct Authority, which said on Thursday it was looking into the issue.

The identity of the entity supplying the audio feed has not been confirmed. – Reuters /The Financial Times Limited 2019

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