Brexit uncertainty leaves GBP/USD on the defensive
Written by Canarian Weekly Business
THE past couple of weeks have seen Brexit uncertainties dominate currency markets, prompting considerable volatility in the pound, along the way.
This has seen GBP/EUR slump from a high of 1.14 euros to 1.13, over the last two weeks. EUR/GBP has climbed from £0.87 to £0.88. At the same time, a firmer US dollar has resulted in GBP/USD falling from $1.31 to $1.30, and EUR/USD holding at a low of $1.15.
In terms of GBP movement, nearly everything has been driven by Brexit sentiment, with the UK's failure to secure a deal with the EU, prompting significant volatility in the pound.
The euro has also had a difficult time in recent weeks, with some positive data being overshadowed by an escalating row between Italy and the rest of the EU, as Rome looks to flout EU rules by seeking to run a 2.4% deficit, in its 2019 budget.
Meanwhile, the uncertainty surrounding both the pound and euro proved to be a major boon for the US dollar, with rising safe-haven demand, coupled with a hawkish outlook from the Federal Reserve, helping to propel USD exchange rates higher.
Brexit is likely to remain the most pressing concern for GBP investors, over the next couple of weeks, with further weakness in sterling expected, unless some positive progress towards a deal is made. Also of note will be the Bank of England's latest rate decision, at the start of November, with markets hoping the recent bump in wage growth will lead to a more hawkish outlook from the bank.
At the same time, the upcoming Eurozone PMI figures could place some more downward pressure on the euro, over the coming weeks, as economists forecast they will highlight the bloc's continued slowdown.
Finally, the US dollar may run out of steam over the next couple of weeks, with the release of the latest US GDP figures expected to confirm that the second quarter's surge in growth failed to carry over to the third quarter.
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