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Sterling falls, FTSE slips as UK faces ‘moment of truth’

George Soros, billionaire speculator who ‘broke the Bank of England’ in 1992, predicts Brexit could be reversed if economic damage is too high.

 
Sterling falls, FTSE slips as UK faces ‘moment of truth’
 

George Soros, the billionaire speculator turned philanthropist who ‘broke the Bank of England’ successfully betting against the pound in 1992, has predicted Brexit could be reversed if the economic damage becomes too painful.

In an article emailed to Reuters, Soros suggested the ‘moment of truth’ was fast approaching for in the formal negotiations started this week to split the UK from the European Union.

‘The fact is that Brexit is a lose-lose proposition, harmful both to Britain and the European Union. It cannot be undone, but people can change their minds,’ Soros said.

‘Households will realise that their living standards are falling and they will have to adjust their spending habits. To make matters worse, they will also realise that they have become over-indebted and they will have to pay back their debts,’ he added.

Soros comments emerged as the pound fell 0.7% after Mark Carney, governor of the Bank of England, used his annual Mansion House speech to say now was not the right time to raise interest rates.

Carney dashed hopes of those who thought the Bank was shifting towards lifting base rate from its all-time low of 0.25% following last week’s 5-3 split on the monetary policy committee.

‘The sharp drop in sterling last year is being blamed for the Bank of England’s continued refusal to raise rates to curb inflation, which spells bad news for UK consumers, who could continue to suffer falling wages packets for the foreseeable future,’ said Dennis de Jong of UFX.com, a Cyprus-based online currency broker.

The pound dropped to $1.2649 against the dollar with the greenback firmer against leading currencies following remarks yesterday by New York Fed president William Dudley that a tight labour market was driving up inflation, with the implication that the Federal Reserve would continue to raise US interest rates.

In London gilt prices fell and their yields rose as bond markets again pushed out their forecasts for a UK interest rate rise.

Sentiment for government bonds was also affected by a comment from Standard & Poor’s that it was likely to cut the UK’s credit rating at its next review.

Moritz Kraemer, head of sovereign ratings at S&P, told Reuters the agency did not have to wait for the end of Brexit talks to change its UK rating. The firm removed Britain’s prized triple A rating last June after the EU referendum, reducing it by two notches to AA and assigning it a negative outlook. That made another cut in the rating likely, Kraemer said.

Trading in UK shares was lacklustre after yesterday’s 0.8% rally. After an early modest rise caused by the weakness in sterling, the FTSE 100 reversed and fell 15 points or 0.2% to 7,509.

Gains in technology and consumer stocks were offset by falls in miners and energy companies as fears of a global oversupply of oil pushed Brent crude futures $1 lower at $45.88 a barrel.

‘Mid cap’ stocks also flagged with the FTSE 250 index 59 points or 0.3% lower at 19,814. Syncona (SYNC ), the health sciences fund formerly known as Battle Against Cancer investment trust, bucked the trend with a 3.9% rise to 159p.

However, Domino’s Pizza (DOM) dropped 7% or 23p to 293p after Investec analysts resumed coverage with a ‘sell’ rating and a price target of 271p.

The Investec scribblers also made their presence felt at N Brown Group (BWNG), up 6.7% or 19p at 303.75p, after they cut the large-size fashion retailer to ‘add’ from ‘buy’ but lifted their target price to 320p from 270p. This helped the FTSE Small Cap index gain 14 points or 0.3% to 5,640.

In Europe the FTSEurofirst 300 index softened four points to 1,537.

22 comments so far. Why not have your say?

TJ33A

Jun 20, 2017 at 14:55

"The sharp drop in sterling last year is being blamed for the Bank of England’s continued refusal to raise rates to curb inflation, which spells bad news for UK consumers, who could continue to suffer falling wages packets for the foreseeable future''....seriously.....does anyone read this nonsense through before it is published? Why won't anyone print the truth? Bank of England seeks to debase Sterling as far as it can as the UK is bankrupt and unsustainable and capital is shifting elsewhere. Governments and elites will seek to cover these facts in any way they can by giving a multitude of nonsense reasons found in such articles above. At the moment it is like the frog slowly being boiled alive but perhaps people will awake from their slumber before it too late......as ever it is the decent and hard-working that will suffer the most as they trust their leaders and really expect them to be looking out for them......which they are clearly not.

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Robert Walsh

Jun 20, 2017 at 16:28

The way out of our economic woe is to increase the country's internal production of food, energy, utilities, manufacturing, transport systems, medical functions, vehicles, clothing, local holidays and any other necessities that I cannot think of right now.

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Robert Walsh

Jun 20, 2017 at 16:29

The way out of our economic woe is to increase the country's internal production of food, energy, utilities, manufacturing, transport systems, medical functions, vehicles, clothing, local holidays and any other necessities that I cannot think of right now.

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Miss Tearious

Jun 20, 2017 at 17:01

Totally agree with Soros that we're on the road to ruin with Brexit. We still have time to come to our senses.

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an elder one

Jun 20, 2017 at 17:04

Putting a damper on imports generally and from the EU in particular can be no bad thing in this acquisitive nation of ours; tough on foreign suppliers, but who cares if we can't meet the balance from our own manufacturers; having to compete for heads with the manipulative finance industry.

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colin fellowes

Jun 20, 2017 at 17:15

Spot on George. There are going to be no Brexit winners. What a mess !

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Robert Walsh

Jun 20, 2017 at 17:46

The only Brexit losers are going to be bankers and financiers (The Chinese Emperor's attendants in the childrens story.). And I am a Capitalist.

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Adam Eve

Jun 20, 2017 at 18:04

So George Soros reckons we are on the road to ruin?

This is the man who BET AGAINST us choosing Brexit! and probably stands to lose a lot of money as a result !

No wonder that he would like us to change our minds!

SINCE BREXIT was announced my sales have gone from strength to strength unsurprising more exports than ever!

Eventually our grandsons will THANK US for restoring our country back to OUR control.

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Stewart Roper

Jun 20, 2017 at 18:28

George Soros is really quite sinister in my view. He has no skin in the game but his money is everywhere interfering with elected politicians. He is a globalisation freak and really should not be paid so much attention.

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jeffian

Jun 20, 2017 at 23:20

Remainers just don't get it. Sometimes it isn't just about money, and this is one of those times. Both the Treasury and the Bank of England got it horribly wrong in the pre-Referendum debate (when they shouldn't even have been taking 'sides' anyway) and I'm no more inclined to believe them or Soros now than I was before. As shown by their previous forecasts,nobody knows; short term they have been way off the mark and long term has only been expressed in terms of 'losses' against some assumed level of growth if we stayed in the EU (i.e. 'you'll be better off, but we calculate not as well off as if you'd stay in'). Frankly nobody will notice. My own view is that the political benefits outweigh any costs. The future will be whatever we make of it.

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Robert Walsh

Jun 21, 2017 at 11:28

You are right Jeffian. If we just would stop wearing so many different colour football jersies and raging at the people in jerseys which do not match ours we can sort ourselves out. Let's all wear a Teresa May coloured jersey at least until we have Brexitted. Then we can return to our interteam squabbles and backbiting again.

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Pilgrim

Jun 21, 2017 at 11:29

@Jeffian,

You are right, I don't get it.

I have no idea precisely what it is that Brexiters in general want, and my impression having canvassed from door to door, is that most of them don't know what they want either. All I have heard is vacuous slogans, and clear evidence that very few people have any understanding of how the apparatus of our own government, politicians and civil servants, operates, or of the nature of the EU institutions, or of the true significance of our engagement in the EU.

What is true is that the Cameron government had already made a lot of enemies following the 2015 General Election. The fiasco with the tax credit system, and the NHS confrontations meant that many voters saw the referendum as an opportunity for showing their resentment of the government.

In the event 37.4% of the electorate voted to leave the EU (and 62.5% did not). Using a strand of peculiarly British logic we have decided that 37.4% is a majority of the electorate and thus expresses the "Will of the British People".

Phillip Hammond has the view that the British People did not vote to be made poorer. You seem to disagree.

There is no dimension to Brexit that makes true economic sense for the UK. The only differences between soft versus hard Brexit is that the damage to the economy and our society may be less with soft Brexit.

The mere prospect of Brexit is already causing us significant economic damage. The current rate of inflation by official measures is already the highest for four years, but that is only half the story. My latest 12 month energy price fix is up by 16% on last year, as is pound cost of the food we buy from Europe (half our food) and the cost of imports from other markets is also increasing similarly.

Soros is absolutely right. Let us hope that we can find a way out of this Brexit madness sometime soon.

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Robert Walsh

Jun 21, 2017 at 12:35

Pilgrim, 17 million people would not agree in every detail on why they voted to leave the EU. But I guess that it covered reasons like this. We do not want to turn our Houses of Parliament into a museum. We do not want to disband our armed forces. Because of the prevalent world climate of intergroup violence and terrorism we do not want our secular cultural (and I mean cultural not racial) balance to get out of our control. When we are not squabbling among ourselves we are big enough and historically wise enough to look after ourselves and at the same time be buddies with and supportive of the EU. We can handle our requirements quite well enough ourselves.

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an elder one

Jun 21, 2017 at 13:12

Robert; Pilgrim has a bad case of verbal diarrhoea, his/her output is a hotchpotch of unrelated notions and numbers from which is drawn a vacuous but pessimistic conclusion.

My impression of chatting around is that brexit is seen as a political endeavour first and foremost and the economics can look after itself; managed with intelligence - there's the rub!

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jeffian

Jun 21, 2017 at 13:18

Pilgrim,

I can't speak for others but my own reason for voting Brexit was nothing to do with the economy (sclerotic and declining as our trade with EU is) and everything to do with extracting ourselves from the undemocratic and corrupt political organisation that is the EU. To come out of the EU is nothing to do with having good relations with Europe, trading with it, travelling around it and moving freely in it, as I have done since long before we were part of the EU. Why is it impossible to have a trading relationship without being part of the 'political union'? Most of the rest of the world isn't part of the EU but they're not told they must join the European Parliament and subject themselves to EU laws, rules and judgements before they can deal with European states.

Damned lies and statistics, eh? 72.2% is a pretty high turnout by the standards of most democratic countries and the majority was decisive. If 13m people decided not to vote, it was either because they weren't interested or couldn't care either way, so they went with the majority by default. To claim that did not represent their "will" is perverse; if they felt that strongly they should have voted! The argument that only an absolute, rather than marginal, majority counts is specious but would have resulted in us having no Government at all most of the time. Jeremy Corbyn tells us he is a 'Government in Waiting' with 262 seats. How does that work?

A common tactic of Remainers, which you and Philip Hammond seem to be following, is to add 'interpretations' to the result without any justification or evidence. "the British People did not vote to be made poorer. You seem to disagree." I do nothing of the sort. The only question on the ballot paper was "Should the UK remain a member of the EU or leave the EU?". Nothing else. Not "and do you want to be poorer?" (though, by crikey, that's what the Remain side, the Treasury, the Bank of England all tried to frighten us with). So you're left with the rather elitist idea that most people either didn't know or didn't understand what they were voting for. Hmmmm!

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jeffian

Jun 21, 2017 at 13:20

While struggling with "verbal diarrhoea" myself, I see that an elder one has made the point rather more concisely!

Thank you.

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mike mcdonnell

Jun 21, 2017 at 18:11

very well put jeffian, dismal Hammond is the Ted Heath of today, remember how we were only joining the common market ? , George Soros fled his country for freedom and wealth in the US, but he would be happy to see Britain become a part of what is looking increasingly like a German controlled Europe .Soros has no patriotism, just money.

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colin fellowes

Jun 21, 2017 at 18:21

Brexit -- so far nothing much to worry about is there, other than the economy stagnating, Sterling going down the toilet, many companies holding off on investment and some considering relocating abroad, inflation rising, likely a massive Brexit divorce bill, Michelle Barnier saying "the consequences of Brexit are substantial ". I look forward to hearing something positive !

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jeffian

Jun 21, 2017 at 19:04

Every 'remoaner' conflates being part of the EU with the economy as if they were one and the same thing. They are not. The "positive thing" you wish to hear is that we will be free to elect politicians that represent our interests and influence policies which affect our lives. (If you are going to argue with that, how to explain the General Election result?!). Our future is in our own hands, not subservient to the other 27 EU members (many/most of whom clearly do not have our interests at heart), nor (God forbid!) the unelected Commission. The positive side is that we can do whatever we like including, for example, letting anyone we want come to live and work here whilst controlling numbers and denying those we don't want. The US seems to manage it quite successfully; why can't we?

"the consequences of Brexit are substantial". Michel Barnier would say that, wouldn't he? Was he talking about us or EU?! Of course it is a serious matter for both but his judgement might be coloured by the thought of the loss of the UK budget contribution and the idea that any suggestion of 'success' may 'encourage les autres'. Remember, there are vested interests on both sides.

Among my peer group, the biggest reason to remain seemed to be financial self-interest, ranging from lawyers moaning that they would have to split pan-European practices to the rather pathetic one that he travelled a lot and was worried about the £/€ conversion rate! As I said at the outset, some things are more important than money. To my mind, our sovereignty is one of them.

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Pilgrim

Jun 21, 2017 at 23:42

@Robert Walsh

"17 million people would not agree in every detail on why they voted to leave the EU." This is very true Robert. In fact the 'Leave' campaign official and otherwise, did not hesitate to persuade voters hoping for completely different policy outcomes.

What is your hope Robert, that a UK out of the EU will create a tariff regime to protect British jobs, or the opposite, press for free trade and the abolition of tariffs thereby closing down even more of what remains of British industry?

This difference in outlook runs right through the middle of the 'Leave' camp.

In the USA the same dilemma can be described as Donald versus Hillary. My take on this is a little different, this is an area where the EU represents a middle way, a shared market with protections against external players.

"We do not want to turn our Houses of Parliament into a museum.", well, aside from the ceremonial paraphernalia perhaps, there seems to be little risk of that outcome. I'm sure that the devolved parliaments of the UK are not regarded as museums, indeed they seem to be very effective at dealing with the issues within their competence, Nor have we had any doubt about the role of our Parliament over the last 40 years. Rather a silly argument, none of the outcomes you purport to fear have come about so far, and none look likely to. Typical meaningless Brexit nonsense, sounds great until you think about it!

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Pilgrim

Jun 22, 2017 at 00:01

@an elder one,

A centenarian doubtless, with arguments that subtle you must surely prevail!

Where are you chatting round to acquire these profound economic insights? The golf club or the old folks home perhaps?

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an elder one

Jun 22, 2017 at 09:58

Pilgrim, grow up child! - one ageist snub deserves another. Golf: you are way off target; I've never played; admittedly the people I talk to are rather more mature than your commentary would suggest of you.

The vote to leave was essentially a desire for nationhood, expressed in many different ways, with the belief its economics could work itself out. Yours, daresay some other worldly cosmopolitan ideal; nothing wrong with that in principal; it takes all sorts to make a nation; daresay your time will come when my generation is gone.

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