Sterling Tanks

The Sterling plunged to a fresh three month low against US dollar as investors grew concerned by media reports that the UK Government is preparing for a hard Brexit from the EU. UK Prime Minister Theresa May who is to speak today, may lay out plans for a hard Brexit, hinting earlier that she may not be comfortable retaining access to the single market. GBPINR made a low of 1.1983 in the morning session today, which has not been seen since the short lived flash crash on 7th October, 2016, when the Pound lost close to 10% in one day.

The Sterling has lost around 19% against US dollar since Britain voted to leave European Union in 23rd June referendum this year. The pair came under further pressure after Federal Reserve decided to rate hike in December and hinted at more rate hikes in 2017. This along with the unexpected victory of Donald Trump in the US presidential election pushed the dollar into a sharp rally, which is now seeing a breather.

Currently though the weakness in the Pound is due to market anticipation that the UK PM may ive up the access to the single market, choosing instead to take control of Britains borders and immigration. This take the Pound further down and be difficult for specific industries in the UK namely the financial sector and the automobile sector.

Technically speaking, the pair has broken the major support of 1.22 last week and seems to be headed towards the next support at 1.1950 levels. Any decisive break below this level could see the launch of a fresh sell off in the currency. However a bounce back above 1.2350 will turn focus back towards 1.2450/1.2500 levels.