Pound exchange rate slumps on mounting Brexit uncertainty
Philip McHugh June 29th 2018 - 2 minute read
The pound fell back again on Thursday with the shadow of Brexit continuing to hound market sentiment.
Meanwhile, trade in Sterling appears mixed this morning, with GBP/EUR sliding to €1.1267 and GBP/AUD plummeting to AU$1.7816, while both GBP/NZD and GBP/CAD are holding steady at C$1.7335 respectively NZ$1.9371. Only GBP/USD is showing any positive movement so far as it ticks up to $1.3109.
Looking ahead, the pound may suffer further losses this morning if UK GDP is confirmed to have fallen to 0.1%, as expected, at the start of 2018.
What’s been happening?
The pound slumped yesterday, falling sharply against its peers as Brexit jitters continued to hound the UK currency.
The latest tumble in Sterling came after Theresa May was warned that time is running out for the UK to reach an agreement with the EU, with Irish leader Leo Varadkar describing the lack of progress in recent months as ‘disappointing’.
GBP investors also expressed doubts over the potential for any positive progress to be made at a two day summit of EU leaders in Brussels, with Brexit likely to be side lined as leaders instead focus on solving the ongoing migrant crisis.
The GBP/EUR exchange rate was met by some of the heaviest losses of any Sterling pairing on Thursday, exacerbated by some robust German inflation figures in June helping the euro to outperform many of its peers.
Meanwhile the GBP/USD exchange rate briefly struck a new eight-month low on Thursday as Sterling continued to lose out against the US dollar amid heightened trade tensions between the US and China.
However some US dollar’s gains were unwound later in the session following the release of the latest US GDP figures.
The final reading saw US growth revised lower than initially forecast, sliding from 2.9% to just 2%, missing previous estimates of a more modest decline to 2.2%.
What’s coming up?
The pound could find itself in another difficult spot this morning as the UK publishes its latest GDP figures.
The final reading is widely expected to confirm that UK economic growth slowed to just 0.1% in the first quarter of 2018, likely dragging on Sterling sentiment, although any surprise revision upwards could see GBP rally.
Meanwhile trade in the euro may be a little mixed this morning, with the single currency’s rally in the event of a successful EU summit being declared, potentially being clipped following a sharp drop in Germany’s latest retail sales figures.
Finally the US dollar could quickly recoup yesterday’s lost ground, with the release of the Federal Reserve’s preferred measure of inflation, the PCE price index, with another lift in inflationary pressure likely to buoy the USD exchange rate.