The pound continued to be lower against its key counterparts in European trading on Tuesday, after the Bank of England Governor Mark Carney warned that risks surrounding referendum have begun to “crystallise” and the nation has entered “a period of uncertainty and significant economic adjustment.”
While delivering the BoE’s latest financial stability report, Carney said that the Brexit vote has heightened the prospects of material slowing in the economy.
“The UK has entered a period of uncertainty and significant economic adjustment.”
The BoE chief said that the bank has a “wide range of tools available,” including further quantitative easing, to stem the economic fallout from the Brexit vote.
Speaking at the plenary session of the European Parliament in Strasbourg, European Council President Donald Tusk said that the European Union wishes to have the U.K. as a close partner in future, but the latter can have single market access only on acceptance of freedom of movement.
“Leaders made it clear that access to the single market means acceptance of all four freedoms, including the freedom of movement,” Tusk said.
The currency was also undermined by slowing service sector growth in the U.K. and political uncertainty relating to U.K. leadership battle to replace Prime Minister David Cameron who resigned post-U.K. referendum.
Survey results from Markit showed that the U.K. service sector activity growth weakened to match the 38-month low registered in April.
The Service Purchasing Managers’ Index dropped to 52.3 in June from 53.5 in May. However, the score was above the expected level of 52.8.
Nigel Farage, who has been a leading proponent of Brexit campaign, resigned as the leader of the UK Independence Party on Monday. Farage is the second party leader to quit from the helm, after the resignation of David Cameron as party leader and Prime Minister following the Brexit vote.
In other economic news, results of a survey by the Centre for Economics and Business Research and YouGov showed that pessimism among British businesses nearly doubled after the June 23rd referendum that resulted in a surprise decision to leave the European Union.
The CEBR/YouGov survey showed that 49 percent of businesses who responded to the survey felt pessimistic about the U.K. economy after “Brexit” versus 25 percent in the week before the referendum.
The currency has been trading in a negative territory in the previous session, amid rising risk aversion on falling commodities, as well as worries about renewed political uncertainty in the U.K.
The pound depreciated to a 31-year low of 1.3093 against the greenback, a 1.4 percent decline from yesterday’s closing value of 1.3280.
The pound fell to 0.8507 against the euro, a level unseen since October 2013. This marks a 1.4 percent slide from Monday’s closing quote of 0.8391. If the pound extends slide, it may test support around the 0.88 area.
Final data from Markit Economics showed that the euro area private sector growth remained unchanged in June.
The composite output index came in at 53.1 in June, the same as in May, but above the flash score of 52.8. A score above 50 indicates expansion.
The pound slid to an 18-month low of 1.2728 against the franc, compared to 1.2884 hit late New York Monday. On the downside, the pound may test support around the 1.26 region.
The pound dipped to 133.11 against the yen, a level unseen since January 2012. Extension of the pound’s downtrend may see its challenging support around the 130.00 mark. The pair was trading at 136.15 when it closed deals yesterday.
Looking ahead, U.S. factory orders data for May is slated for release shortly.
At 2:30 pm ET, Federal Reserve Bank of New York President William Dudley is expected to speak about the local economy at the Greater Binghamton Chamber of Commerce in New York.
The material has been provided by InstaForex Company – www.instaforex.com