GBP/USD falls to $1.28 on election uncertainty

Philip McHugh October 25th 2019 - 2 minute read

The pound suffered from a sell-off on Thursday, tumbling to a one-week low in response to heighted political uncertainty in the UK. 

Sterling is struggling to find momentum this morning, with GBP/EUR flat at €1.1564, GBP/USD range bound at $1.2852, and GBP/CAD subdued at C$1.6798. GBP/AUD and GBP/NZD are holding steady at AU$1.8824 and NZ$2.0162 respectively.

The spotlight will be on Brussels today, with EU leaders expected to make a decision on whether to grant the UK another Brexit delay.

What’s been happening?

The pound tumbled yesterday as markets became spooked by rising UK political uncertainty.

Despite some opposition from within his cabinet, Boris Johnson announced he would hold a vote calling for a snap election on Monday if the EU agrees to a lengthy Brexit delay.

Markets soured on Sterling as a result, with investors fearing that an election may prove inconclusive and fail to break the deadlock in parliament.

The euro was mostly range bound through Thursday’s session as the European Central Bank (ECB) delivered its latest rate decision.

With October’s policy statement mostly in line with September’s, the focus was instead on outgoing ECB President Mario Draghi and his legacy at the helm of the bank.

Meanwhile, the US dollar spiked yesterday as souring risk sentiment prompted investors to flock to the safe-haven currency.

USD gained in spite of a faster-than-expected contraction in US durable goods orders. 

What’s coming up?

Expect to see some volatility in the pound today as EU leaders give their verdict regarding another extension to the Brexit deadline.

Observers expect the EU to agree to delay Brexit until January, potentially prompting some GBP selling as it prolongs Brexit uncertainty for another three months.

For EUR investors the focus today will be on Germany’s business confidence figures. Will more doom and gloomy from the Eurozone’s largest economy exert pressure on the euro this morning?

Finally, the US dollar may look to carry its current momentum through to the end of the week, but with Federal Reserve rate cut expectations firming any further upside in USD may prove limited.

Written by
Philip McHugh

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