British Pound Drops While FTSE Makes New Highs

The pound sterling just dropped under $1.29 as Conservatives are losing their lead over Labour in election polls. The British Prime Minister, Theresa May, has called snap elections to get a new mandate before tough Brexit negotiations begin.

 

Since last June’s Brexit vote, the British currency has lost a lot of value due to economic and political uncertainty. Long gone are the days of high-flying pound. Ten years ago the British currency was worth almost $2.

 

According to the latest poll, MarketWatch reports, the Tories are only leading by 5 percentage points. The elections will take place on June 8th.

 

This political uncertainty has led to decline in currency, but the British stock market is doing quite well. The FTSE 100 Index has just made an all-time high, and now stands over 7,500. What is helping is the weaker pound. Since most of the companies on the FTSE 100 Index are multinationals, weaker currency is helping their exports and profits coming from foreign currencies.

 

Pharmaceutical companies such as GlaxoSmithKline and Hikma Pharmaceuticals picked up gains, and so did a consumer products giant, Univeler PLC.

 

Not all FTSE 100 companies are winning. About 14 percent of the index’s weighting comes from energy stocks. With low petroleum price, oil stocks got hammered.

 

However, down the line a bad Brexit would mean that the United Kingdom would lose access to the single European market and end up under WTO tariffs. Also, the City of London could get hammered. Many financial institutions there are already preparing to set up their operations in continental Europe.

 

 

 

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