Banks

RBS share drop accelerates on stress test flop

Stressed. Shares in Royal Bank of Scotland have accelerated their losses this morning, falling over 4.5 per cent after the state-backed lender came in bottom of the heap in the Bank of England’s latest stress tests. RBS failed the toughest ever stress tests carried out by the BoE, with results this morning showing the lender’s […]

Continue Reading

Capital Markets, Financial

BGC Partners eyes new platform to trade US Treasuries

BGC Partners plans to launch a new platform to trade US Treasuries early next year, in a bid to return to a market in the middle of evolution, according to people familiar with the plans.  The company, spun out of Howard Lutnick’s Cantor Fitzgerald in 2004, sold eSpeed, the second-largest interdealer platform for trading Treasuries, […]

Continue Reading

Financial

Sales in Rocket Internet’s portfolio companies rise 30%

Revenues at Rocket Internet rose strongly at its portfolio companies in the first nine months of the year as the German tech group said it was making strides on the “path towards profitability”. Sales at its main companies increased 30.6 per cent to €1.58bn while losses narrowed. Rocket said the adjusted margin for earnings before […]

Continue Reading

Currencies

Renminbi strengthens further despite gains by dollar

The renminbi on track for a fourth day of firming against the dollar on Wednesday after China’s central bank once again pushed the currency’s trading band (marginally) stronger. The onshore exchange rate (CNY) for the reniminbi was 0.28 per cent stronger at Rmb6.8855 in afternoon trade, bringing it 0.53 per cent firmer since it last […]

Continue Reading

Currencies

Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

Continue Reading

Categorized | Currencies

Pound’s fall is a reality check for May


Posted on October 4, 2016

The face of Queen Elizabeth II is seen on rolled ten, twenty, and fifty pound sterling banknotes in this arranged photograph taken in London, U.K., on Thursday, March 6, 2014. The pound was 0.5 percent from the strongest level in four years against the dollar after the Bank of England announced it would keep interest rates at a record low this month. Photographer: Simon Dawson/Bloomberg©Bloomberg

There is a conspiracy theory that Donald Trump is trying to throw the US presidential election. How else to explain his car-crash performance at the first debate?

Here is another one about Theresa May: she is deliberately talking down the pound, or at least letting it fall.

    The summer has been a phoney war over sterling, with fears over Brexit counteracted by surprisingly good data. On Sunday, the UK prime minister broke cover and ended the stalemate with a speech to the Conservative party conference that laid out the timing and process of the Brexit negotiations.

    Sterling’s subsequent plunge should not have come as a surprise. The market has been fretting about the date when the UK would trigger Article 50 notification, starting the two-year countdown for officially leaving the bloc. Some have even assumed it would never happen.

    The conference speech was evidently a key set-piece moment for Mrs May. Further vacillation on the issue would have frayed fragile investor confidence and tested the patience of the EU to the limit. So she set an end of March deadline.

    Better to live with a sharply weaker pound now than have a drip-feed of weakening sterling, the theory goes.

    Special Report: London and the World

    The City of London faces up to the future beyond Brexit

    illustration for London and the World special report 'Beyond Brexit' story

    How serious is the threat to the financial services sector — and are there opportunities?

    Why does that matter? Decades in politics will have taught Mrs May the value of timing. Triggering Article 50 right after the vote would have continued the post-referendum slide of the pound, crushing confidence. Either by luck or by judicious monetary policy, the summer delivered a calmer market, free-spending tourists and foreign investors who kept faith with the UK.

    This week, standing in front of her party, was her moment to shore up her rightwing credentials with a “hard Brexit” tone, and to let sterling fall again. The side benefits are record FTSE 100 and 250 highs: good news for the pension pots of the party faithful as well as the competitiveness of UK exporters.

    But there are only so many times you can talk up the benefits of a falling currency, particularly if it leads to rising input prices and depleted consumer spending power, and investors pulling projects and jobs from the UK.

    That should be Mrs May’s reality check. For those investors who had been clinging on to the belief that Brexit would never happen, her speech this week was theirs.

    You need JavaScript active on your browser in order to see this video.

    No video

    roger.blitz@ft.com