Yesterday afternoon sterling exchange rates attempted to rebound from their recent lows, as earlier this week the pound came under increasing pressure, most likely owing to the no-deal Brexit rhetoric issued by new Prime Minister Boris Johnson.
|Currency Pair||% Change (Month)||Difference on £200,000|
At the lowest point this week cable (GBP to USD) interbank rates hit 1.2120, which was the lowest level seen between the pair in 28-months. The pound has lost over 4% against the US dollar in July, and it’s had its worst monthly performance since October 2016 which was just a few months after the Brexit vote had taken place.
The boost in the pound’s value yesterday afternoon may not have been down to any specific positive data releases or comments from UK politicians, so the likelihood is that the gains came as a result of sterling being sold off in such dramatic fashion since Boris Johnsons appointment as Prime Minister just over a week ago.
Perhaps the key event for sterling exchange rates this week will come this afternoon, when the Bank of England (BoE) will announce its most recent interest rate decision along with the market commentary that follows it. The BoE will take its turn following last night’s Federal Reserve Meeting over in the US. The outgoing Governor of the BoE, Mark Carney will also give a speech outlining his views regarding UK monetary policy which could also provide currency rate fluctuations.
Although no changes are expected regarding UK interest rates, if there are any forewarnings regarding the negative impact a no-deal Brexit could have on the UK economy, we could see sterling exchange rates rattled as we’ve seen earlier in the week due to the no-deal rhetoric.
Yesterday afternoon the chief market analyst at CMC Markets UK, Michael Hewson said that should there be a deterioration in the political climate we could see GBP/USD interbank exchange rates fall as low as 1.10 quickly if there is a sustained move below 1.20. Following a move below 1.10 the all time low of 1.05 could then be tested.
In the early hours of this morning news has broken that the new government is preparing to spend £2.1 billion on Brexit preparations. This is to ensure that Britain is ready to leave the EU on the 31st of October as PM Johnson has made it clear that he wants Britain to leave without a deal in place, if the EU is unwilling to renegotiate the existing Brexit deal.
The Brecon by-election is also worth looking out for today, as voters will go to the polls in the area in what will be the first electoral test for new PM Johnson. It’s being watched closely. If the Conservatives lose the seat it will cut their working majority in Parliament to just one seat. There is quite a lot a stake so it could be worth following as it could influence the pound.
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