The slide in the pound has continued this morning with the currency falling to its lowest level since last August against the US dollar. The fall in sterling has failed to boost the FTSE however, with the benchmark dropping lower by more than 40 points.
More Brexit warning signs do little for sterling
If the huge drop seen in the pound in the immediate aftermath of the Brexit vote was due to a single seismic shock which caught many traders off guard, the recent weakness is more akin to a death by one thousand cuts, as a near constant news flow of negative stories in the past couple of months has seen the GBPUSD rate fall by more than 10% from it’s April peak - a similar amount to the fall seen the day after the referendum in June 2016. The most recent sign of steps being taken to ensure against a no-deal Brexit has come in the number of lawyers registering in Ireland in an apparent bid to pre-empt any issues regarding future access to the EU. More than 1,600 solicitors have signed up to the Irish Roll of Solicitors since the vote, with the preceding years typically seeing less than 100 register per annum.
Tui and BT drag FTSE lower
Despite a bright start, the FTSE has fallen lower by more than 40 points, or half a percent this morning, with Tui and BT the two biggest decliners. Travel company Tui, seems to have suffered from the recent heatwave throughout Europe, with the firm warning investors to remain a little cautious this year due to the hot weather adversely impacting operations. It appears that Britons and North Europeans have shunned their usual holiday trips to Southern Europe due to the warmer weather at home - and quite possibly from a UK perspective also because of the fall in the pound. The stock of Tui has fallen nearly 10% since last night’s close so far this morning. BT is the next worst performer of the blue-chips, falling by 4.5% after the shares have gone ex-dividend. The decline on the day in points terms of 10.85 is almost exactly the same as the 10.55 dividend that will be paid, so this is clearly just a case of the market subtracting the imminent cash outflow from the stock’s market value and therefore shouldn’t really be seen as a negative development.