Pound falls sharply over fears that the UK will lose access to single market

Economy - Himanshu Gill - Jan 16,2017

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pound falls sharply over fears that the uk will lose access to single market

 

The pound fell sharply against the dollar, dropping just below $1.20 for the first time since the October’s flash crash, ahead of a key speech from UK Prime Minister Theresa May.

As per the reports, investors believe that May is going to signal plans to quit the European Union’s single market to regain control over Britain’s borders and laws. The currency declined by almost 1.6 percent against the dollar to $1.199.

The pound has now fallen over 20 percent against the dollar since the last year’s Brexit referendum to low levels that were last seen in 1985. The pound has also dropped to a two-month low against the euro last weekend, falling more than 1 percent to about 1.13 euros.

May is prepared to withdraw from the European Union’s tariff-free trade with the region in return for the power to restrict immigration and strike commercial deals with other countries.

The UK economy has recently stood against all odds by showing steady growth and fetching foreign investment. But a number of investors are a skeptic that leaving the single market would hit British trade with the EU; its biggest partner in trading.

However, US President-elect Donald Trump said that falling pound was actually great for UK business, suggesting that a weaker pound will help UK firms to become more competitive abroad.

Investors are still worried about the sterling, with 65,831 more short than long contracts on the currency recorded by the US Commodity Futures Trading Commission in the week to January 10.

German Chancellor emphasized that full access to the EU single market would require the UK to stick to the policy of free movement of goods, people, services and capital.

While UK Chancellor of the Exchequer, Philip Hammond, said that if UK losses access to the single market it would look to focus on new strategies.