How low can sterling go?

Sterling hit an eight-week low on Tuesday morning in reaction to parliament’s approval of the Article 50 bill – but with at least two years of negotiations ahead, could the currency fall even further?

How low can sterling go?

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Down to $1.21 on Tuesday, the pound saw further losses on top of the 20% it had already lost against the dollar since the Brexit referendum results in June 2016.

MPs voted down two amendments added by the House of Lords to the Article 50 bill on Monday evening, with peers voting to overturn their own amendments the same night – clearing the way for Theresa May to pull the trigger on Brexit negotiations.

James Calder, research director at City Asset Management, said: “You would have thought Article 50 and Brexit should be priced in.

“If news comes out of a hard Brexit there is the possibility it could fall even further.”

Joshua Mahony, market analyst at IG, is also bearish on the currency. 

“Despite the fact that the pound is hugely undervalued by historical standards, the uncertainty surrounding the future of the UK means we find little to be bullish about for the pound as we face confrontational negotiations,” he said. 

“One could be excused for feeling we have had quite enough referendums over the past year, yet with Scotland seeking a second vote, there are plenty of reasons to question what the UK will look like in just over two years’ time.”

 

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