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Pound falls to three-year low against the dollar

Joanna Faith
Written By:
Joanna Faith

The pound has fallen to a three-year low against the dollar amid mounting speculation of a General Election and ongoing Brexit uncertainty.

It fell below $1.20 to $1.196 this morning, its lowest since October 2016.

Against the euro, the pound was down to €1.09 having started the day at €1.1.

The decline came after Prime Minister Boris Johnson threatened to call a General Election on 14 October if opposition MPs and rebel Tories vote today to bring in a bill designed to stop a no-deal Brexit.

According to Tom Stevenson, investment director at Fidelity Personal Investing, the fall in the value of the pound is “a two-edged sword”.

“Although weaker sterling is bad news for anyone hoping to use the UK currency abroad – most obviously tourists – it can actually help investors with well-diversified portfolios,” he said.

“The UK stock market has an unusually heavy weighting towards exporters and companies earning a high proportion of their profits overseas.

“These companies can benefit from a falling pound because it makes foreign profits more valuable on translation back into sterling and it makes UK exporters more competitive in overseas markets.”

Stevenson said this explains why the FTSE 100 often rises on days when the pound falls, and vice versa.

Today, however, saw both the pound and the FTSE 100 fall in tandem.

Stevenson said this was “a worrying sign” that investors may be turning their backs on UK assets in light of the prevailing political uncertainty.