Pound exchange rates nosedive as May’s Brexit statement drives no-deal fears
Philip McHugh September 24th 2018 - 2 minute read
The pound plummeted against all of its major peers on Friday, with markets fearing a no-deal Brexit may still be on the cards following a defiant speech by Theresa May in the wake of a disastrous Salzburg summit.
Sterling looks set to bounce back at the start of this week’s session however, with GBP/EUR climbing to €1.1159, GBP/USD advancing to $1.3112 and GBP/CAD rising to C$1.6962, while both GBP/AUD and GBP/NZD are surging, striking AU$1.8039 and NZ$1.9668 respectively.
Looking ahead Brexit is likely to continue to dominate market sentiment this week, with investors bracing for further volatility in the pound.
What’s been happening?
The pound collapsed at the end of last week’s session, with the UK currency weakening against its major peers in the wake of EU leaders’ formal rejection of Prime Minister Theresa May’s Brexit proposals.
These losses were then intensified in the afternoon as a defiant May confirmed that Brexit talks were at an impasse, adding that the EU must ‘respect the UK’ and that ‘no deal is better than a bad deal’.
This has reignited fears that the UK could be headed towards a no-deal Brexit, something which is seen as a worst-case scenario by investors.
The sharp drop in the pound hit the GBP/USD exchange rate particularly hard, with the pairing suffering its largest single daily drop so far this year.
Meanwhile the GBP/EUR exchange rate plummeted 1.2% on Friday, with the heightened Brexit uncertainty preventing the euro from sliding despite the Eurozone’s latest PMI figures revealing the bloc’s manufacturing sector was expanding at its slowest pace in over two-years in September.
What’s coming up?
In the absence of any notable UK data, Brexit is likely to remain in the spotlight for GBP investors this week.
This is highly likely to result in further volatility in the pound throughout the session, with markets on the watch for any updates from officials on how talks are progressing.
Meanwhile the euro may look to kick off this week on a strong footing, with the single currency potentially strengthening should today’s German business confidence figures print in line with expectations.
Finally the first half of this week’s session is likely to see limited movement in the US Dollar, as markets hold their positions ahead of a widely expected rate hike from the US Federal Reserve on Wednesday.