Sterling’s drop has caused some companies to downgrade profit forecasts. AFP / JUSTIN TALLIS
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The pound risks turning from prop to pain for the U.K. economy as Brexit negotiations near.While the currency's weakness has helped cushion the economy in the immediate aftermath of the referendum, the latest slide may carry more costs than advantages.While a weaker currency can give exporters a boost, those advantages can disappear when the slide is as fast and disorderly as sterling suffered last week, according to Nomura Holdings Inc.For consumers already noticing the higher cost of foreign travel, the risk is that a weaker currency results in price rises at home, while faster inflation may make it less likely that the Bank of England will be able to support a slowing economy via lower interest rates or more asset purchases – increasing the risk of stagflation.Sterling, 2016's worst performer among 32 major currencies tracked by Bloomberg, has plunged as the potential has become more real for a so-called hard Brexit that would see the U.K. settling for restricted access to the EU's single market – the largest in the world – in return for the government retaking control of immigration.The drop of 4.2 percent in the week was the most since that ending June 24, when the Brexit vote results were published.
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