Pound Sterling exchange rate tumbles as renewed Brexit concerns drag

Philip McHugh May 22nd 2018 - 2 minute read

The pound fell back again on Monday, suffering heavily losses against the majority of its peers as renewed Brexit uncertainty dragged on the currency.

Sterling appears to be holding its ground in early trade today however, with GBP/EUR flat at €1.1401, GBP/USD virtually unchanged at $1.3446, GBP/CAD stabilising at C$1.7163, while GBP/AUD and GBP/NZD are both holding steady at AU$1.7699 and NZ$1.9303 respectively.

Looking ahead, a speech from the Bank of England’s Mark Carney could reignite interest in the pound should he hint at the possibility of a rate hike later in the year…

What’s been happening?

The pound slipped back again at the start of this week’s session as the spectre of Brexit hung over the currency once again.

Markets remain jittery over fears the UK government is still split on how to handle breaking away from the EU, with reports emerging that Prime Minister Theresa May could be ousted by her party if she faces any more setbacks with her Brexit legislation.

Out of all of the pound’s major trading partners the euro was the one which struggled the most to capitalise on its weakness, with the GBP/EUR exchange rate losses being trimmed by ongoing concerns regarding the new Italian government.

Markets continued to express their reservations about the new anti-establishment government being formed by the 5-Star Movement and League parties as they fear its plans to cut taxes and increase spending could undermine the stability of the Eurozone.

At the same time the GBP/USD exchange rate slumped to a new low for 2018 as the dollar was bolstered by the announcement of a trade truce between the US and China.

A framework agreed over the weekend is set to agree to avoid tariffs being slapped on billions worth of imports between the two countries, and comes as a major relief to USD investors who feared a trade war between the two sides would be damaging for everyone involved.

What’s coming up?

The pound may rally this morning following a speech by BoE Governor Mark Carney, should he appear optimistic on the chances of the bank still raising interest rates later in the year.

Conversely Sterling could retreat following Carney’s speech, should he signal that any further monetary tightening would be reliant upon the UK economy showing some more robust growth.

An empty data calendar could hamper the euro’s movement today, especially if it leaves markets to remain focused on Italy and the uncertainty surrounding the new coalition government.  

It’s also set to be a quiet day in terms of US data today, with the US dollar rally possibly taking a breather should investors take the opportunity for some profit taking.

Written by
Philip McHugh

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