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Pound is weakest ever at start of summer and worse may be coming
[LONDON] The pound is at its weakest ever for this time of year and if seasonality is any guide, it could get even worse in August.
Sterling hit a two-year low against the US dollar this month and has suffered a record run of weekly losses versus the euro. Seasonal patterns show it has fallen against the greenback for the past five years in August and against the common currency for four of those. August sees risk averse trading conditions, according to MUFG strategist Lee Hardman.
This August, investors will face a replacement for Prime Minister Theresa May who is likely to choose a new chancellor and raise the prospect of the U.K. crashing out of the European Union if no Brexit deal is reached. With a divided Parliament on recess for the summer holiday, time is running out before the deadline to leave the bloc.
"It is a low volume month generally, so moves may be exaggerated," said Royal Bank of Canada's chief currency strategist Adam Cole. "We'll have enough to worry about in August anyway, with a new prime minister and as we edge closer to October 31."
The pound fell 0.3 per cent to 89.90 pence per euro and $1.2533 by 2.40 p.m. in London, having fallen 4 per cent in the past three months to be the worst-performing major currency.
It may extend the slide to 92 pence per euro by September or October, according to ING Groep NV strategist Chris Turner, who sees Boris Johnson as leader failing to get a new agreement with Brussels and heading into autumn on a "no-deal ticket".