The pound continues to slump as the overbearing presence of Brexit and a lack of any deal-making progress have most likely meant that sterling has fallen to fresh new lows against most major currency pairings.
In particular, GBP/EUR interbank trading levels which started last week at 1.088 have fallen to 1.073 by the end of the week.
In fact, last week saw the trading pair fall 2.61% and may see this week’s levels surpass previous lows to 1.064 making it the 14th successive week of a fall in exchange rates.
With sterling rates continuing to fall, there is potential that the GBP/USD interbank rates could push through the 1.20 barrier that the currency pairing has yet to pass.
However, a poll published by Reuters has predicted that the GBP/USD exchange rates may suffer from Brexit to such an extent that the pairing could reach lows of 1.17 before the 31st of October.
This was forecasted on the basis of a no-deal Brexit, which has recently been tipped above the 50% probability mark by BNP Paribad, meaning that economists are now considering a hard Brexit to be the most likely outcome.
Whilst this is the case, a variety of different forecasts have been predicted by economists which range from 15%-75%, also according to Reuters. With such diverse opinions on the political direction of Brexit, it is not surprising to see the currency volatility as the markets react to the uncertain circumstances.
With sterling rates fluctuating more than usual, you may wish to get in contact with you dedicated account manager here at Foreign Currency Direct (FCD) to see how we could limit your exposure to the currency market.
For the week ahead there is very little economic data to be released which would cause any significant volatility to the already fragile pound.
Tuesday marks the release of the UK Unemployment figures for Q2. Whilst this figure has been reducing from 4% at the start of this year down to 3.8% in July, it is expected that this release continues the trend seen in the past 7 months. However, Brexit has been making business decisions difficult for companies who may consider pulling out of the UK, which could affect unemployment figures.
Regardless, a rise in unemployment could potentially cause sterling rates to fall as the economic labour force has contracted whilst a reduction in unemployment, as seen in previous months, means labour expansion. Should unemployment continue in its previous trend, it may give the pound some short-term respite against its major counterparts who have been making significant inroads against sterling rates.
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