Sterling tumbles to 31-year low; oil up, stocks slip

Tue Oct 4, 2016 5:02pm EDT
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By Rodrigo Campos

NEW YORK (Reuters) - Sterling slumped to a 31-year low versus the U.S. dollar on Tuesday as concerns over Britain's separation from the European Union were compounded by renewed strength of the greenback on a recent string of better-than-expected economic data.

Both Brent and U.S. crude oil rose late despite the dollar's strength on a surprise U.S. crude stockpile drawdown.

Sterling hit its weakest since mid-1985, hit by a growing sense that Britain may be heading for a 'hard' exit from the EU in which it severs links to the single market in favor of total control over immigration.

Such a move could crimp London's ability to remain a global financial hub.

The pound GBP= was down 0.9 percent at $1.2722, having hit a low of $1.2715, and at a three-year low versus the euro at 88.02 pence EURGBP=.

"Everything people are hearing from the UK is not positive for its currency," said Paresh Upadhyaya, director of currency strategy at Pioneer Investments in Boston.

London's FTSE .FTSE cheered the idea of a weaker pound boosting firms' exports, rising 1.3 percent to its highest in more than a year and within half a percentage point of its record high hit in April 2015. [.EU]

On Wall Street traders withdrew from interest-rate-sensitive stocks as recent U.S. data including a strengthening manufacturing sector and upward revision to second-quarter gross domestic product has boosted bets of a rate hike by the Federal Reserve before the year ends. Traders now see above-even chances of a rate increase in December.   Continued...

An English five Pound note and coins are seen at a restaurant in the British overseas territory of Gibraltar, July 21, 2016. REUTERS/Jon Nazca