Pound US dollar exchange rate stumbles after Trump blasts May’s Brexit deal
Philip McHugh November 28th 2018 - 2 minute read
The pound slumped yesterday following Donald Trump’s warning that the current Brexit agreement could make a future UK-US trade deal unworkable.
Sterling is showing more resilience this morning however, with GBP/EUR edging up to €1.1298, GBP/USD stable at $1.2734 and GBP/CAD flat at C$1.6970, while GBP/AUD and GBP/NZD hold steady at AU$1.7618 and NZ$1.8732 respectively.
Coming up later today will be the publication of the Bank of England’s (BoE) latest Financial Stability Review and accompanying Brexit report, with GBP exchange rates potentially strengthening depending on the bank’s outlook.
What’s been happening?
The pound fell back against most of its peers on Tuesday as sentiment in the UK currency was knocked by Donald Trump’s criticism of Theresa May’s Brexit deal.
The US President suggested that while the agreement ‘sounded good for the EU’ it could prevent a post-Brexit trade deal between the UK and US.
The remarks coincided with the launch of May’s two-week campaign to convince MPs and the British public to back the deal, with GBP investors fearing it will provide MP’s in opposition of the deal with more ammunition to swing an upcoming parliamentary vote in their favour.
However these weren’t the only market moving remarks made by Trump, with the losses in the GBP/USD exchange rate being accentuated by the US President’s threat to slap further tariffs on China, reigniting trade war fears and causing investors to flock to safe-haven currencies such as the US dollar.
Meanwhile broad weakness in the euro helped to cap losses in the GBP/EUR exchange rate yesterday, with EUR investors spooked as Rome vowed to stick to its budget plans despite the European Commission’s recent ruling that it broke EU fiscal rules.
What’s coming up?
Looking ahead, the Bank of England’s latest Financial Stability Review will likely be in focus today, alongside its accompanying report on the impact of likely Brexit scenarios.
This will see the bank deliver its formal assessment of Theresa May’s Brexit deal and how it would compare to a no-deal scenario.
Meanwhile the US dollar may extend its gains this afternoon with the publication of the latest US GDP estimate, if US third quarter growth proved more robust than initially thought.