Signs that the Brexit is already taking its toll are accumulating. A mix of surveys, news reports and a political turmoil is taking over.
GBP/USD is falling once again, over 100 pips and back to the 1.31 handle. The low so far is 1.3162, above the 1.3115 level that provided was the the lowest level since 1985. Can it break to even lower ground?
What is hurting the pound?
- Political fallout: All the protagonists of Brexit have now retired: PM David Cameron which initiated the referendum has quit immediately, the man that jumped on the Brexit train and led the campaign Boris Johnson quit and finally the long term Brexit proponent Nigel Farage quit. The Conservative party is moving along to elect a new leader and the future of relations with Europe remains uncertain, It is unclear if the UK will get the “Norwegian deal” meaning a de-facto membership without a say in decisions or a significant worsening of conditions.
- Rush to the exits: Standard Life suspended withdrawals from its property fund as it cannot fulfill requests from customers to get their money out. They would need to sell property first. Other funds could follow. This joins reports that British companies are seeing a big drop in orders from the continent. The near future is not so positive.
- Business surveys: Markit’s construction PMI has dropped to the lowest level since 2009. At 46 points, we see significant contraction. Also the euro-zone Sentix Investor Confidence crashed. Also YouGov’s poll shows growing pessimism. We will soon get the latest Services PMI from the UK.