Pound US dollar exchange rate plummets below $1.30 amid elevated UK political risks
Philip McHugh October 23rd 2018 - 2 minute read
The pound beat a hasty retreat at the start of this week’s session, particularly against the US dollar as growing political animosity towards Theresa May spooked markets.
Sterling appears to have found a firmer footing this morning however, with GBP/EUR flat at €1.1315, GBP/USD muted $1.2967 and GBP/CAD stable at C$1.6986, while GBP/AUD and GBP/NZD hold steady at AU$1.8331 and NZ$1.9780 respectively.
Looking ahead, the release of the Eurozone’s latest consumer confidence figures could give GBP/EUR some breathing room this afternoon, should pessimism have risen in October.
What’s been happening?
The pound was hit by heavy losses yesterday, with investors souring on the UK currency as doubts regarding Theresa May’s future as Prime Minister dragged on sentiment.
Reports swirled over the weekend that the PM could face a vote of no confidence by the end of the week amid growing criticism from within the Conservative over how she has handled Brexit.
These concerns were accentuated by the news that the DUP would lend its support to rebel Tory legislation that would block a backstop clause being included in any potential deal with the EU over the Irish border, heaping even more pressure on May and leaving Sterling to plummet on Monday.
The political headwinds in the UK led to the GBP/EUR exchange rate falling to a three-week low on Monday, with the pairing only avoiding further losses as Italy’s budget dispute with the EU rumbled on at the start of the week, leading to broad weakness in the euro.
The pound’s losses were more clearly highlighted against the US dollar however, with the GBP/USD exchange rate slumping below $1.30 for the first time in over two weeks as the twin concerns of Brexit and Italy led to a marked upswing in safe-haven currencies such as the ‘greenback’.
What’s coming up?
Looking ahead, political uncertainty in the UK is likely to remain a key concern for GBP investors today, although the pound could potentially find some respite if Bank of England (BoE) Governor Mark Carney strikes a more hawkish tone in a speech this afternoon following the recent pick-up in UK wage growth.
Meanwhile the euro could face some hurdles later today with the publication of the Eurozone’s latest consumer confidence figures, with the index forecast to slide even further into negative territory this month.
Finally the US dollar may continue to punch higher today if the Federal Reserve policymakers speaking this afternoon echo the hawkish tone seen in the latest Fed minutes.