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Pound Caught In a Wave of Volatile Trading

Following a sharp decline on Tuesday, the pound rose slightly in early trading in Asia to regain lost ground.

Pound Caught In a Wave of Volatile Trading

The pound was trading at $1.2258 early Wednesday, up by 0.8% from its decline on Tuesday.

On Tuesday, the currency had decline by over 2%, falling below the $1.21 mark and below €1.10 against the euro.

So far, the pound has fallen by about 18% against the dollar following the Brexit referendum—levels not seen in thirty years.

Angus Nicholson of Melbourne IG said, “It is unfortunate that this volatility facing the pound is not likely to end until there is certainty around Brexit.”

He further noted that the pound’s slight rise in Asian trading might have been driven by Prime Minister Theresa May’s action to amend the terms of a debate over the Brexit issue. Traders perceived this as giving Parliament the mandate to vote on the issue.

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Negative mood

Neil Wilson of ETX Capital was concerned about the increasingly negative mood around the pound in recent days and said it was now at the level of an emerging market currency.

He also noted that comments by Michael Saunders, a senior official at the Bank of England, did not help the situation.

Mr. Saunders, a member of the BOE interest rate-setting committee said previously that there was a possibility that the pound could continue to fall but that this should not be an immediate cause of concern.

These comments were seen as a sign that the Bank could continue to maintain the low interest rates.

Other traders commented that the sterling was under pressure from reports that Morgan Stanley and Citi were contemplating moving their staff out of London, which increased concerns about foreign investment exiting the UK.

A leaked report indicated that foreign investment flight as a result of Brexit could likely cost the Treasury over £66bn each year.

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