Pound slumps to 30-year-low against the dollar after Theresa May hints Britain is heading for a ‘hard Brexit’
Markets react to reports PM will take the UK out of the single market with lowest figure excluding October’s flash crash
THE POUND has slumped after Theresa May hinted Britain is heading for a ‘hard Brexit’ - falling to its lowest point for 31 years excluding October's "flash crash".
The currency markets have reacted poorly to reports the Prime Minister will confirm plans to take the UK out of the single market in a major speech tomorrow.
Before stabilising this afternoon, Sterling fell to below $1.20 in early Asian trading – the lowest point in more than three decades except for the blip in October last year which saw the pound drop more than 6% to $1.18.
Since the historic vote to leave the EU last June the pound has fallen around 20% against the dollar, hitting lows not seen regularly since 1985.
It also dropped to a two-month low against the euro this morning, falling more than 1% to about €1.13.
By 5pm the pound was trading at 1.2044 dollars compared to 1.2199 dollars at the previous close - almost a percentage point lower.
And the FTSE looks set to end an unprecedented winning streak, with 12 successive days of record closes and fourteen days of rises about to come to a close.
The share index is has fallen back from its record intra-day level and is now down 0.11% at 7327.
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The fall also came after Chancellor Philip Hammond suggested ministers could slash corporation tax rates if Briton was frozen out of the single market.
He told a German newspaper that the Government would do "whatever we have to" to ensure UK businesses would stay competitive.
Downing Street would not be drawn on reports Mrs May would announce plans to withdraw from the single market and the European customs union during her speech at London's Lancaster House on Tuesday morning .
But The Sunday Telegraph quoted a government source as saying: "She's gone for the full works. People will know when she said 'Brexit means Brexit', she really meant it."
The pound's latest fall comes as Donald Trump said in an interview with The Times the fall in its value was "great" for British business.
The US President-elect suggested his Scottish golf course in Turnberry had benefited, and that "business is unbelievable in a lot of parts in the UK".
But reports of the UK leaving the single market are "like kryptonite" to traders who back the pound, said Kathleen Brooks, an analyst at City Index.
And according to Neil Wilson, senior market analyst at ETX Capital, Sterling could fall as low as $1.10 as Britain’s heads towards the Brussels exit door.
"The market is now positioning for some fairly punchy rhetoric from Theresa May," said Chris Weston, chief market strategist at IG, an online trading company.
"This idea of 'hard Brexit' and a clean break from the single market seems increasingly likely, with the government making a bid to gain full control over immigration," Weston said.
Sterling "is an out-and-out political currency... and the prospect of volatility here is now very high" despite some positive macroeconomic data, he said.