You can enable subtitles (captions) in the video player
What's up with sterling? The short answer is, it's falling. The long answer: for months, the pound has been stuck in limbo. Up a bit here, down a bit there, waiting for the UK government to say what it really wants to achieve out of the exit from the EU. Now the country has a new prime minister, Boris Johnson, and whether you agree with him or not, he's at least being clear. The UK is leaving the EU at the end of October with or without a deal. It's that second bit, without a deal, that's bugging the pound. Ever since the referendum in 2016, the currency markets have been clear.
At one point, HSBC was calling the pound the unofficial opposition. Any sign that the UK is heading for a deal brings a rally. Any sign that it's serious about crashing out is met with a drop. A few economists argue that in the long run the UK is better off out of the EU, but there's a very strong consensus - from debt-rating agencies, from investors, from companies, from economists - that a sharp deal-free exit would deliver a hit. Sterling, quite simply, does not like it.
So while the new prime minister is beating the drum for a no-deal Brexit, the pound has hit the skids. It has slumped to a two-year low against the dollar, its main benchmark, and also against the euro. Now this is great news for the UK stock market, large chunks of which - in the FTSE 100 at least - derive their earnings largely in dollars. But it's a blow for importers, and it is grim news for anyone packing up their factor 50 and heading to the Med for the summer.
On paper, it's good for exporters, but the type of exports the UK makes and its reliance on specialised supply chains means it would be hard for a drop in the pound to soften the blow of crashing out of the EU with no deal. Just ask PSA, which has indicated it would pull car production from Ellesmere Port in Cheshire if a no-deal crash out did occur. Markets and British politics are fickle. This drop in the pound could prove to be a blip, but selling pressure really seems to be building from a variety of types of market participants. These are testing times.
