Sterling fell once again on Wednesday ahead of the State Opening of Parliament, as Prime Minister Theresa May struggles to cobble together the deal with the DUP that will give her government a majority.
Sterling dropped below $1.26 in early trading, following on from losses seen on Tuesday after Bank of England Governor Mark Carney warned on the long-term effects of Brexit and said interest rates were unlikely to rise for some time.
The pound weakened after officials warned on Wednesday that a DUP deal was not imminent. Societe Generale strategist Kit Juckes wrote in a morning note to clients: “Governor Carney’s Mansion House speech killed any wind that was in sterling’s sails yesterday.
“The Conservative Party’s lack of progress in reaching a deal with the DUP won’t help sterling either”.
Strategists at investment bank Morgan Stanley also warned on the short-term value of the pound, but said it was likely to pick up in the long-term, adding that a short period of British Pound outperformance should be expected.