Anxiety over the cost of a hard Brexit have sent sterling reeling again
Latest: FTSE fails to hit record closing high
Bankers talk about quitting London in 2017
Shares hit record levels as sterling sinks
Hard Brexit could cause budget hole
Bank of England’s Saunders thinks pound could fall further
5.32pm BST
Sterling is now at an eight-year low against a basket of major currencies.
And if it weakens much further, we could hit 40-year lows, according to Reuters journalist Jamie McGeever.
Back to the 70s.
Trade-weighted sterling falls to 73.9 today. Its low in 2008 was 73.3. Beyond that, it's territory not seen since the 1970s pic.twitter.com/BWWxcZZiSH
5.30pm BST
Today’s selloff means the pound has suffered its worst four-day run since late June, and the aftermath of the EU referendum vote.
Back then, sterling was worth around $1.48. It has now shed around 17.5% of its value since.
So let’s have some ugly facts. First of all, the crash in the pound is a reminder of one overriding danger that some of us have been warning about for years: Britain does not pay its way in the world. It buys far more goods and services from other countries than it sells to them.
That deficit is made up entirely by what Mark Carney, governor of the Bank of England, has called “the kindness of strangers”. Which is fine, for as long as those foreign strangers consider London a safe haven for their cash. That shouldn’t be taken for granted now that Britain is about to take a giant political and economic leap into the dark – and sterling has already plunged further this year than the Argentinian peso. Remember, Whitehall is only beginning to think seriously about the mechanics of leaving the EU: years of this mayhem are still to come.
Related: The crash in the pound punctures the delusion that Brexit Britain will flourish | Aditya Chakrabortty
5.14pm BST
Back over in Dublin, the Irish government has unveiled a series of measures designed to protect the economy from a Brexit shock.
It aims to protect foreign investment, boost tourism and reduce the exposure of farmers in the wake of the collapse of sterling.
“The measure acts to secure and embed investment, which can lead to sustainable growth and strengthens Ireland’s innovative capabilities.”
4.53pm BST
Breaking: Britain’s stock market has failed to hit a new closing high, as the City frets about the costs of a hard Brexit.
A late afternoon selloff sent the FTSE 100 down by 0.38%, or 26 points, to 7070 points. It had earlier hit a new all-time high of 7129 points (as covered here).
A lunchtime surge saw the FTSE smash through to 7129; now it’s back hovering below 7100, that midday burst of energy proving to be brief.
Perhaps reports that both Citi and Morgan Stanley have stated they will leave London if Britain appears to be heading for a hard Brexit have weighed on investors’ appetite for the UK index; perhaps it was a bout of profit-taking. Either way the FTSE couldn’t hold onto its highs for long.
The blame for the general ‘risk off’ mood can be attributed partly to Alcoa, whose disappointing figures have put US markets on the defensive, but overall the equity rally is being knocked by a rising US dollar, as traders rush back to the greenback thanks to soaring expectations of a move by the Fed in December
4.32pm BST
The pound is hitting new lows against the US dollar in late London trading.
It has now shed almost 1.5 cents today, to just $1.221.
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4.31pm BST
Worth noting that the euro is also having a bad week.
Traders are piling into the US dollar in anticipation that American interest rates might rise in December.
The pound isn't the only currency losing balance. Euro down 1.1% since the week started, reaching a new 2-month low against the dollar today pic.twitter.com/uKb50IQ9bI
4.28pm BST
Fujitsu says that its 1,800 planned job cuts are not a response to the Brexit vote, and it remains committed to the UK (that’s hot off the Reuters terminal)
3.57pm BST
The pound is taking another pummelling, now down its lowest point of the day at $1.223.
It was briefly lower on Friday, during the flash crash that drove sterling to fresh 31-year lows.
The pound falls to near $1.2230, its lowest level of the day so far https://t.co/vC7w2lAt2Y pic.twitter.com/uMR2mJBAIO
3.56pm BST
Bad news for UK workers at Fujitsu. The Japanese electronics firm is planning to cut up to 1,800 jobs as part of a ‘transformation programme’.
That’s via the Press Association.
Fujitsu job losses are a "hammer blow" for workers - @unitetheunion
3.20pm BST
Global stock markets are turning a little sour now, dragging the FTSE 100 away from today’s record high.
US aluminium firm Alcoa has disappointed investors, by missing revenue and profit forecasts today.
Expectations were that we will finally get a quarter when we can be confident to say that earning season will give us a number which will make the foundation a little more stronger for the US economy.
But the number released from Alcoa was simply just a disaster and has made investors angry who are willing to liquidate their position.
2.56pm BST
The government won’t be lured on whether we’re in a full-blown sterling crisis, or not, reports Paul Waugh of Huffington Post.
Juat asked No10 if sterling rate was "not a crisis". No10 says it "wdnt seek to categorise it one way or another". I tried, I tried.
2.30pm BST
Two senior bankers have warned that they could start moving jobs out of the City, perhaps next year, if Britain appears to be heading for a hard Brexit.
“How do we and when do we start making decisions ... knowing the plan is ready to go ... it could be in the first quarter of 2017.”
“It really isn’t terribly complicated. If we are outside the EU and we don’t have what would be a stable and long-term commitment to access the single market then a lot of the things we do today in London, we’d have to do inside the EU 27.”
2.08pm BST
Today’s stock market surge is only a ‘hollow victory’, argues Laith Khalaf of financial services group Hargreaves Lansdown.
He says it’s being driven by currency movements rather than a fundamental improvement in UK companies.
Nonetheless UK investors will still be cheered to see a boost to their pension pots and ISA valuations, as it represents a genuine increase to their wealth in pounds and pence.
The concern will be that a reversal in fortunes for the currency could see the gains wiped off as quickly as they appeared. That may well be the case, though it’s hard to see anything in the foreseeable future that’s going to propel the pound back to its former glory.
2.03pm BST
Having smashed through the intraday record high, City traders are now wondering if the FTSE 100 will do the double and close at a record high.
And with two and a half hours to go, it’s nip and tuck, frankly.
#FTSE goes above all-time high thanks to further #sterling falls -great for those that generate revenues abroad, not so fun for travelling!
1.57pm BST
This is good, from the Press Association:
Pound and FTSE 100 since the EU referendum#Brexit pic.twitter.com/s4m8MBXor0
1.51pm BST
The Irish government also warned that the Brexit vote is “a real risk” to the Republic’s economy, due to the close trade ties.
Dublin has already trimmed its growth forecast for 2017, as this statement from today’s 2017 Budget explains:
Minister Noonan #Budget17 pic.twitter.com/ewlzfVYNqW
1.46pm BST
During the delivery of his budget to the Dail (Irish parliament) this lunchtime Ireland’s Finance Minister Michael Noonan was quite bullish in defending the Republic’s controversial low corporation tax regime.
“Ireland’s 12.5% corporation will not be changed and nobody in Europe or anywhere else is asking for it to be changed.”
“restates our commitment to meet international tax principles and how our corporate tax regime remains fair but competitive into the future.”
1.22pm BST
Back in Dublin, crash barriers have been erected to prevent any surge of protestors demonstration over today’s Irish budget 2017.
So far there has been little sign of many demonstrators unlike in the days of the last recession when thousands congregated in Molesworth Street over austerity cuts and deals to recapitalise Ireland’s busted banking system.
1.01pm BST
Neil Wilson of ETX Capital agrees that the weak pound is the main factor driving the FTSE 100 to an all-time high today.
Brexiters might point to the FTSE’s rise as a sign of strength but this is very much a story of sterling weakness boosting foreign earnings – which account for around two-thirds to three-quarters of FTSE 100 company revenues.
Having said that today’s gains largely come from UK-focused stocks like Next, Whitbread, Marks & Spencer, Travis Perkins and Taylor Wimpey.
We also got comments today from one Bank of England policymaker that the MPC would not be too fussed if inflation overshoots – the market seems to have taken this as a clear indication that rates are staying on the floor for a while yet. A weak pound and lower-for-longer interest rates is generally good for equities.
12.54pm BST
Duncan Weldon, head of research at City firm Resolution Group, points out that the FTSE 100 isn’t a great barometer of the UK economy.
FTSE 100 record high. Britain* is booming!
(*Britain in this case defined as "a collection of multinationals with non-Sterling revenues")
12.45pm BST
Ben Chu of the Independent is tweeting some interesting graphs about the FTSE:
....though deflated by Consumer Prices not even close to the record... pic.twitter.com/CvdlFDNmMg
...on re-invested dividends basis FTSE 100 returned to record high in August... pic.twitter.com/1Q6lsFjh0x
12.44pm BST
We’re calling it a record high... but The Telegraph’s Tara Cunningham points out that the Footsie is 6% down this year, when priced in US dollars.
That means UK shares are attractive for American investors, another factor that has driven the market up since the Brexit vote.
I hate to be a Negative Nancy... But the #FTSE100 is still down 6pc this year in US dollar terms. https://t.co/wrk9hNgUxp
12.29pm BST
12.17pm BST
Boom! The pound is falling further as lunchtime approaches in the City, driving shares in London up to their highest ever level.
The FTSE 100 index has just smashed through to a new all-time intraday high, up 30 points at 7129. That breaks the previous record set in April 2015.
UK investors will once again be cheering the impact of a falling pound, as the drop in sterling once again works its magic on the FTSE 100.
The index has hit its all-time high, although this will doubtless bring out the legions armed with their charts of the FTSE rebased into a variety of currencies to paint the index in a less flattering light.
Of course, most UK investors will simply be pleased to see their portfolios rise, and will worry about the currency later. Good numbers from luxury firm LVMH have helped Burberry to rise steadily this morning, with the stock touching its highest level since August 2015.
12.15pm BST
There are also protesters outside government buildings in Ireland today, ahead of the budget:
12.05pm BST
A local entrepreneur and founder of a Irish startup company called Parkio has welcomed Dublin’s decision to halve capital gains tax for entrepreneurs, to 10%, to help cushion the impact of the Brexit vote.
His accountant had estimated he was going to be paying approximately 33%.
One hurdle less with the new 10%Capital gains tax! In UK shares need to be held for 1 year to qualify for 10% here it's 3y? @Independent_ie
12.00pm BST
Back in Ireland, the government’s new budget is now expected to contain some measures to counteract and indeed exploit the impact of Brexit.
There will be additional funding for the Republic’s Industrial Development Authority, which over four decades has attracted multi-national corporations from Dell to Apple, Microsoft to Google to the country.
11.45am BST
Anil Kashyap refuses to say whether he thinks the pound is likely to suffer further falls over the next few years.
I’d have to resign from the University of Chicago if I started forecasting currency moves, Kashyap tells the Treasury committee -- we’re known for our position that the market sets these prices.
Until we see what the relations are between the UK and the EU, it’s very hard to know where any of this is going to settle
If you lose a bunch of financial services jobs... then the fiscal consequences of that is non-trivial, as those jobs are so high paying, and [generate] so much tax.
You don’t have to lose lots of that before you have a hole in the budget that could be meaningful.
And that could have some knock-on effects for the exchange rate.
11.36am BST
The Treasury Committee is now questioning Anil Kashyap, a US academic who is joining the Bank of England’s Financial Stability Committee.
11.20am BST
And that’s the end of Michael Saunders’ session at parliament, to rubberstamp his appointment to set interest rates on the Monetary Policy Committee.
The big news is that Saunders thinks the pound could extend its recent losses since the Brexit vote. He told MPs that:
“Given the scale and persistence of the UK’s current account deficit, I would not be surprised if sterling falls further, but I am fairly agnostic as to whether any further depreciation is likely.”
I think the economy will do better over the next few quarters. I don’t think that tells you about the long run effects. It’s important not to make judgements on the long run based on the short run view. What the economy does in the next few years is crucial.
Not exactly a sell-out for new-boy Saunders today! $GBPUSD currently unfazed by latest comments re fallout of Brexit pic.twitter.com/b0kEkANqu7
11.10am BST
Q: Is the Bank of England now ‘out of ammunition’ to stimulate the economy?
Saunders says not.
11.03am BST
Michael Saunders say the UK economy will probably perform better than expected over the next few quarters (echoing a point he made in a speech last week).
But that doesn’t tell us much about the long-term effects of Brexit.
11.00am BST
Q: Were the Bank of England’s warnings before the EU referendum justified?
Saunders only joined the Bank of England this summer, so he was still working in the City during the Brexit vote.
10.56am BST
The Brexit vote isn’t the only thing pushing the pound down, Michael Saunders adds.
The UK’s current account deficit (around 6% of GDP) is also weighing on sterling.
Saunders: Given The Scale And Persistence Of UK Current Account Deficit, I Would Not Be Surprised If Sterling Falls Further
BoE's Saunders: Expects MPC To Tolerate Modest Currency-Driven Inflation Overshoot In Next 2-3 Years
10.49am BST
Q: Are you worried about the recent volatility in the pound?
Michael Saunders says sterling is adjusting to the reality that Britain is leaving the European Union, and the likely impact on growth.
10.44am BST
Over in parliament, new Bank of England policymaker Michael Saunders is being questioned by the Treasury Committee.
I don’t think we at the Bank of England can tackle the distributional effects of monetary policy. We can’t set interest rates for different groups.
10.35am BST
Big news out of South Korea: Samsung is “permanently halting production of its Galaxy Note 7.
Killing off the smartphone is a “drastic step”, says Bloomberg, after several customers reported that replacement devices have caught fire.
After halting sales of the new versions of the large-screen smartphone that failed to fix exploding batteries, Samsung finally pulled the plug on a key product that was supposed to compete with Apple Inc.’s iPhones and other high-end smartphones during the U.S. holiday shopping season.
Production will stop, Samsung said in a statement Tuesday.
Samsung's decision to end Galaxy Note 7 production is a drastic step https://t.co/YVrSJ6P2Ne
Instant reaction: pic.twitter.com/8XXAZsqaxY
10.20am BST
At $1.229, the pound has shed almost seven cents against the US dollar since Theresa May announced she’d trigger article 50 by next March.
That’s a fall of around 5%, in less than seven trading days, and means the pound is now 17% lower than on referendum day.
A Brexit is definitely not the end of the world. Moreover, the devalued pound will see exports gain momentum within the next few month.
10.09am BST
Over in Germany, investor confidence has risen this month:
*GERMAN ZEW OCT. INVESTOR EXPECTATIONS 6.2; MEDIAN EST. 4
10.07am BST
John McDonnell MP, Labour’s Shadow Chancellor, has responded to the warning that a “hard Brexit” could cost the Treasury £66bn a year in tax revenues.
“Losing access to the single market would be devastating for jobs, livelihoods and our public services yet the Tory government are prepared to take this desperate step, despite being warned by their own experts of the consequences.
The British people voted to leave the European Union and all sides must respect that decision, but what they certainly didn’t vote for was economic misery and the loss of jobs.”
10.04am BST
After coming tantalisingly close to a new alltime high, the FTSE 100 has now shed all those early gains.
9.51am BST
Despite today’s selloff, sterling isn’t the worst-performing currency today.
That honour has been grabbed by the South African rand, which just tumbled by 3% against the US dollar.
See if you can spot on this rand chart when the reports of Gordhan getting a formal summons landed https://t.co/kX5dQhfIfU pic.twitter.com/1og9MEglGb
9.47am BST
Over in parliament, MPs on the Business Committee are holding a session on Britain’s industrial strategy.
They’ll hear from former chancellor George Osborne, former deputy PM Lord Heseltine and Sir Vince Cable, who ran the BIS department before the last election.
Related: George Osborne to be questioned by MPs as leak reveals Treasury Brexit warning - Politics live
9.31am BST
The UK jobs market is also suffering from the Brexit vote, according to recruitment firm PageGroup.
In the UK, confidence levels remained fragile and below levels seen earlier in the year....
With the prevailing uncertainty in the UK, the challenges in some of our other larger markets and the unpredictable nature of the current cycle, we remain cautious in our short-term outlook.
9.07am BST
It’s been a while since we last had a full-blown currency crisis, everyone panicking because the pound is falling through the floor. Well, we’re having one now.
So says John Humphrys, Today Programme presenter, with a certain amount of relish.
Here at Oxford University we have top international professors saying they might not move to Oxford....
8.57am BST
It’s budget day in Ireland and the first for the new coalition led by Fine Gael but propped up by Independent members of the Dail, and supported for the first time in terms of the national financial plans by the main opposition party Fianna Fail.
8.50am BST
Neil Wilson of City firm ETX Capital is alarmed by the “sharp moves” in the value of the pound this morning.
He fears that Brexit angst could drive sterling down to $1.20.
GBP/USD crashed through the $1.23 handle to around 1.2284, its lowest level since last week’s gyrations. It’s not unreasonable to think that ferocious flash crash was just a very tentative toe in the water and the pound is now plunging headlong into the abyss.
Sterling seems to be looking for a level and it’s really unclear where that could be and so bargain hunting is a risky game to play at the moment. The $1.20 handle earmarked by many before the referendum is definitely in play as everyone seems to be short sterling at present.
8.47am BST
The weak pound is helping to drive the London stock market close to record highs.
The FTSE 100 index of top blue-chip shares has risen by almost 20 points, or 0.25%, to 7118 points.
8.40am BST
Sterling is now at its weakest level since the financial crisis broke out, when measured against a basket of other top currencies.
Reuters has the details:
Trade-weighted sterling hit a nearly-eight-year low of 74.0 at the Bank of England’s first morning print of the index, which measures the pound’s broader strength. It was also half a percent weaker at 90.51 pence per euro.
Some traders cited a Financial Times report that Russian bank VTB may move its European hub to Frankfurt, Paris or Vienna as having added to worries of financial sector cutbacks inLondon due to Brexit.
8.29am BST
Kit Juckes, currency expert at Societe Generale, fears that the weakness of the pound could spread to other assets, such as government bonds and shares.
In real effective terms, sterling is 10% lower than it was in 1992 after leaving the ERM and is now weaker than it was after Lehman.
Press comment is now shifting to embracing the positive effects of a weak pound and in due course that’ll be true but any further weakness from here might simply reflect loss of confidence and be bad for UK assets (gilts, equities, house prices, you name it...) in general.
8.22am BST
Although a weak pound means Britain is poorer, it could also help the economy ride out the Brexit storm.
Ashoka Mody, the IMF’s former deputy-director for Europe, has told the Daily Telegraph that we should be celebrating sterling’s slump.
“It is desirable from every point of view. The idea that Britain is in crisis or is on its knees before the exchange rate vigilantes is ludicrous.
“The UK economy is rebalancing amazingly well. It is a stunning achievement that a once-in-fifty-year event should have gone to smoothly.”
Tuesday's Telegraph Business:
Big beasts praise slide in sterling as boost for economy #tomorrowspaperstoday #bbcpapers pic.twitter.com/hXIZRXWlFT
8.17am BST
The pound’s weakness is being exacerbated by traders piling into the US dollar.
The latest election polls in the US suggest that Hillary Clinton is extending her lead over Donald Trump, which is considered dollar positive.
The most senior Republican in Congress, Paul Ryan, has abandoned Trump after the latest debate against Clinton, further signs that his campaign is losing momentum at this crucial stage of the election race.
Related: Donald Trump marches on amid spiraling disaster of Republican party desertion
7.57am BST
It’s looking like another bad morning for sterling, as the British currency continues to weaken in the face of Brexit worries.
The pound has dropped by over half a cent this morning to $1.229 -- which would be a 31-year low, if you ignored the flash crash that sent sterling tumbling on Friday.
Leaked government papers suggest that leaving the single market and switching to World Trade Organisation (WTO) rules would cause GDP to fall by up to 9.5% compared with staying in the EU.
The draft cabinet committee paper seen by the Times is based on forecasts from the controversial study into the predicted impact of quitting the EU published by George Osborne in April during the referendum campaign. Although the then chancellor faced widespread criticism over the report, the Treasury stands by its calculations, according to the Times.
Related: Hard Brexit will cost Treasury up to £66bn a year, ministers are told
Crucially, the Treasury has used the same figures for WTO Brexit from its controversial April pre-referendum report on longterm consequences
Some Brexit gvt ppl are tonight attacking the Treasury for OTT scaremongering. There are few agreed facts on Brexit, even in government
7.39am BST
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Coming up today....
“We did have bigger plans for the London office, but after Brexit we are scaling them down and building them up elsewhere.
“Our board will decide where by the end of the year.”
The weakness of pound sterling (GBP) remains a major talking point in global markets after the GBP touched a new 1985 low vs. the USD pic.twitter.com/nxUKbvbdjX
Related: Galaxy Note 7: Samsung suspends sales of phones, warning users to 'turn it off'
Tuesday's FT:
Ryan abandons Trump in sign of Republicans losing US vote hope#tomorrowspaperstoday #bbcpapers pic.twitter.com/8yajLfc6rh
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