Sterling hit a 31-year low against the dollar today (4 October) as the market responded to fears May would push for a “hard Brexit”during negotiations with the EU.
The pound fell to $1.27 during early morning trading, putting it 13% lower than its pre-referendum levels.
The dismal news on the currency front coincided with robust data from the UK construction industry, which was one of the worst hit sectors following the Brexit vote outcome.
According to the findings from Markit’s Purchasing Managers’ Index released Tuesday, the sector enjoyed a considerable uptick in business activity in September for the first time since May with residential building and new orders up.
And survey respondents reported “improving confidence among clients and a reduced drag on demand from Brexit-related uncertainty” over the period.
Meanwhile, the FTSE 100 index, chiefly comprised of multinationals with overseas earnings, shattered the 7,000 mark for the first time since May 2015, boosted by the depreciation in sterling. The index had climbed 1.41% to 7081.8 at the time of writing.
Surprisingly, the more domestically focused FTSE 250 index was bolstered to 18,535.4, its highest level on record.
This marks a massive recovery for the mid-cap index, which plummeted by 14% in the two trading days following the EU referendum and had a more challenging time than the FTSE 100 in stabilising.
The FTSE 100’s resilience in the aftermath of the Brexit vote and following May’s announcement has led many to proclaim, including Chris Beauchamp chief market analyst at IG, that “there seems to be no stopping the FTSE 100.”
“There may be no shortage of commentators pointing out that the index is still down in dollar terms, but with the index at its highest level in over a year there is a distinct feel-good factor among UK investors,” said Beauchamp.
“European markets are joining in the party, with Deutsche Bank shares resilient despite no developments on a potential reduction in the Department of Justice fine.
“The traditionally strong quarter for equities has got off to a remarkably good start, although the move has probably been helped by the lack of heavyweight data so far this month.”
