Boris Johnson government heightens No-Deal Brexit fears, and GBP falls
Written by Canarian Weekly Business
STAYING on top of the latest currency news can help you time your transfers more effectively, so find out what you should be looking out for, over the next couple of weeks.
The pound strengthened, initially, in response to the end of the Conservative Party leadership contest, but gains proved very short-lived. Sterling has even fallen against the euro, despite poor domestic data, and the prospect of a rate cut from the ECB.
GBP/EUR continues to test lows of 1.10, with EUR/GBP at 0.90.
The US dollar, on the other hand, has been a little steadier, as investors anticipate Federal-Reserve news. GBP/USD trends near the level of 1.23, while EUR/USD lingers around 1.11.
What’s been happening?
The past couple of weeks have seen Britain’s Conservative Party leadership contest come to an end, and Boris Johnson become Britain’s new Prime Minister. Following weeks of political uncertainty, the news gave the pound a brief lift, before Johnson’s hard-line-Brexit stance sent the currency tumbling.
Fears of how a no-deal Brexit could negatively impact Britain’s economy, in the long-term, continue dominating sterling movement. The European Central Bank (ECB) wasn’t as dovish as expected in its July policy decision, which piled further pressure on GBP/EUR.
Meanwhile, some strong US data, as well as signs that dovish Fed bets had been overdone, have left the US dollar recovering.
What do you need to look out for?
With the new UK government in power, and the clock ticking on the current Brexit deadline of October 31st, the Brexit process will keep driving GBP movement. Unless the odds of a no-deal Brexit retreat, the pound may remain on the back foot.
In terms of economic news, the Bank of England (BoE) delivered its UK policy decision yesterday (Thursday), and UK growth data will come in next week. Any positive news could lend sterling support. The euro and US dollar, on the other hand, are much more likely to be driven by data.
Major Eurozone data, including inflation, growth and PMIs, will be published over the next fortnight. US PMI data, due over the coming fortnight, could also influence Federal Reserve interest rate cut bets, and US dollar movement.
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