The value of sterling continued to fall on Wednesday, after government officials warned that a deal with the DUP was not likely to be finalised ahead of the Queen’s Speech.
Prime Minister Theresa May has been struggling to negotiate a del with Irish party the DUP that will give her government a much-needed majority, after she failed to gain enough seats on her own at the general election at the beginning of June.
Sterling dropped below $1.26 in early trading, following on from losses seen on Tuesday after Bank of England Governor Mark Carney warned on the long-term effects of Brexit and said interest rates were unlikely to rise for some time.
The pound weakened after officials warned on Wednesday that a DUP deal was not imminent. Societe Generale strategist Kit Juckes wrote in a morning note to clients: “Governor Carney’s Mansion House speech killed any wind that was in sterling’s sails yesterday.
“The Conservative Party’s lack of progress in reaching a deal with the DUP won’t help sterling either”.
Strategists at investment bank Morgan Stanley also warned on the short-term value of the pound, but said it was likely to pick up in the long-term, adding that a short period of British Pound outperformance should be expected.
