Reasons to not be cheerful

Following on from our blog yesterday, the pound has hit its lowest level against the dollar since 1985, helping the FTSE 100 surge to near record highs.

Sterling fell to its weakest mark against the US dollar for 31 years, sinking to $1.27.46, following the Prime Minister’s confirmation of a timetable for triggering the Brexit process.

However, with a cheaper pound promising to boost earnings, the London share index soared.

Its highest ever intraday level, in April 2015, was 7,123. However, in dollar terms, the FTSE’s value remains well below its referendum result level.

The FTSE 100 consists largely of export-dominated multinationals which make the bulk of their sales in dollars.

A weaker pound is also good news for exporters, as their goods are more attractive to overseas buyers, but it will hurt holidaymakers picking up foreign currency.

Exporters on the mid-cap FTSE 250 helped it reach an all-time closing high of 18,342.

The nature of this week’s sterling movement has been largely attributed to announcements at the Tory conference in Birmingham.

Investors fear a so-called ‘hard Brexit’ with the UK losing access to the European single market as part of plans to clamp down on immigration.

One of the key things that’s weighing on the pound now is we’ve got low interest rates and the market expects interest rates to go even lower in the UK.

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