A three-day decline in the pound after U.K. Prime Minister Theresa May set a date to start the process of leaving the European Union has left sterling trading at its weakest level versus the euro since 2011.
The pound reached a 31-year low versus the dollar amid concern Britain is headed for a so-called hard Brexit. A weaker currency may help support parts of the economy as the terms of the EU exit are negotiated.
Sterling slid to its lowest level in more than three decades this morning on fears of a “hard Brexit” from the European Union and its single market, although the weaker pound sent UK stocks surging higher.
The pound has already lost 1.7 percent against the U.S. dollar since Prime Minister Theresa May said on Sunday the formal process to take Britain out of the EU would start by the end of March 2017.
Many economists and investors fear May’s government will back a “hard Brexit” option where Britain quits the single market in favour of imposing controls on immigration.
That could hinder inward and outward trade and constrict the foreign investment needed to fund Britain’s huge current account deficit, one of the biggest in the developed world.
Economic activity has held up better than many had expected since Britons voted in a June referendum to leave the EU, but many policymakers are anxious about the prospects for future investment. The Bank of England launched a stimulus package and cut rates to record lows in August and may ease policy again in coming months, which could drag the pound lower.