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GBP/USD dips to 1.18 amid UK political crisis

currency-newsGBP/USD dips to 1.18 amid UK political crisis
The pound retreated on Wednesday, undermined by considerable UK political uncertainty.

Sterling is mixed so far this morning, with GBP/EUR steady at €1.1710 and GBP/USD buoyed at $1.1953. GBP/CAD is flat at C$1.5559, while GBP/AUD and GBP/NZD dip to AU$1.7544 and NZ$1.9353, respectively.

Looking ahead, will ongoing political jitters infuse additional volatility into GBP exchange rates today?

What’s been happening?

The pound slumped yesterday, hitting a new two-year low against the US dollar amid signs Boris Johnson’s days as Prime Minister may be numbered.

This came amidst a flurry of resignations from government ministers, who followed two high-profile cabinet resignations on Tuesday.

The euro came under even more acute pressure on Wednesday, with the single currency being hammered by Eurozone recession fears.

These concerns offset the release of the latest German factory orders, which reported a surprise expansion in order growth in May.

The US dollar, meanwhile, extended its bullish run yesterday, bolstered by a cautious market mood and the release of a stronger-than-expected ISM non-manufacturing PMI.

The publication of the minutes from the Federal Reserve’s latest interest rate decision then bolstered support for the ‘greenback’ as they highlighted policymakers’ willingness to continue raising interest rates.

What’s coming up?

Turning to today’s session, the ongoing UK political crisis is likely to continue to infuse volatility into the pound. Expect to see GBP exchange rates plunge if it looks like Johnson may be forced out of office.

For EUR investors the focus is likely to be on the publication of the accounts from the European Central Bank’s (ECB) latest policy meeting. Could more hawkish signals from the bank help to shore up support for the euro?

Across the pond, the release of the latest ADP employment figures is likely to be a key focus, with the US dollar potentially firming if the June’s figures report a strong uptick in employment growth.

However market risk appetite may continue to act as the primary catalyst of movement for the ‘greenback’, potentially extending its gains if the cautious mood persists.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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