What does the value of the pound tell us about Brexit?

It’s easy to imagine that currency markets can be a guide to the political future, but as Ben Chapman explains, things are not so straightforward

Cashing in on Brexit? (PA)

The pound rose against the dollar on Thursday night and Friday on renewed hopes that a no-deal Brexit will be averted. That outcome is potentially less likely after a report that the Democratic Unionist Party is willing to back Theresa May’s “Plan B” in a vote next Tuesday.

It’s the latest ascent in what has been a very bumpy ride for sterling over the last three years. Each time politicians seem to be veering the country closer to a cliff-edge Brexit, the currency plunges; every time a compromise appears likely, sterling gains in value.

Adam Cole, head of FX strategy at RBC Capital Markets, predicts that a no-deal Brexit – seen as disastrous for the UK economy – would wipe 10 per cent off the value of the pound.