Pound slumps to fresh lows, after UK leaves EU

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THE pound has been on a downtrend, for the last couple of weeks, with markets focused on trade negotiations between the UK and the  European Union, following the UK’s exit, on 31st January.

This has seen GBP/EUR plummet from 1.19 to 1.17, and EUR/GBP edge to 0.85. Meanwhile, GBP/USD fell from 1.32 to 1.28, and EUR/USD slipped from 1.10 to 1.09.

What’s been happening?

Before the end of January, the pound briefly rallied against the euro and US dollar, after the Bank of England (BoE) left interest rates on hold. However, sterling has since given up these gains, with the pound sliding to a two-and-a-half month low against the US dollar, thanks to growing fears that the UK and EU will be unable to reach a trade deal, before the end of the transition period.

PM Boris Johnson has, so far, adopted a hard-line stance in trade discussions, and appears committed to the transition period ending in December 2020.

GBP/EUR losses have not been as severe as those of GBP/USD, however, with the euro weakened after recent data suggested the German manufacturing slump may have continued, after a temporary pick-up in November.

The US dollar was able to gain some support from rising safe-haven demand, as worries surrounding the economic impact of the outbreak of Wuhan coronavirus plagued traders.

What do you need to look out for?

The spotlight will remain on UK-EU trade negotiations, as the two sides head back to the negotiating table. EUR investors will be looking closely at upcoming data from the bloc’s largest economy, as weak German flash GDP could signal the worst is not over.

Over the next few weeks, the dollar may edge higher, if upbeat retail-sales data shows the American consumer remains optimistic, and PMI measures continue to impress in February.

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Posted by on Feb 14 2020. Filed under Business & Finance. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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