It’s fair to say that despite yesterday being data silent, as always politics more than made up for it with regards to currency movements. The sterling tumbled to 28-month lows against the dollar and a two-month low against the euro, off the back of a comment initially made by Michael Gove with regards to the UK Government “working on the assumption” of a no-deal Brexit. Unfortunately for the pound, the sterling fall snowballed through the day, picking up momentum in the Asian trading session overnight and leading to extended losses in the early hours of this morning.
Whilst the Prime Minister is on a whirlwind tour of the Union, reassuring those in Scotland, Wales and Northern Ireland that Brexit will work for them, it certainly hasn’t worked for the markets; with but three months to go until Brexit day, no-deal has never seemed so likely. Technically speaking, the next barriers for GBP to cross would be 1.0810 on GBPEUR, and 1.2170 on GBPUSD – and judging by the speed in which the previous support prices were breached yesterday, it could well push through these.
Elsewhere, there is USD data out at 13.30 GMT, which, if positive, could continue to build the consensus that the Federal Reserve will not be looking to slash rates past the 0.24% – a good sign for the US economy, but a tremendous headache for President Trump, who has to balance the campaign message of being the architect of a booming economy, whilst also attempting to weaken the dollar to support exports and reduce trade deficits. A catch 22 if ever I’ve seen one.
With the pound essentially in free fall against most major currencies, now is the time to reassess and ensure that, if you have plans that include foreign exchange, you contact your account manager to discuss affordability and contingency planning. With the purely political focus driving the pound right up until 31st of October, one can reasonably expect sterling to become increasingly volatile – and with huge moves such as yesterday, more commonplace. Give us a call on 0808 301 4451 from inside the UK, or 020 3930 4975 from outside of the UK, and ask for your account manager.
Have a great day.