Currency Note

No-deal Brexit fears still weigh on the pound

By Erin Harding June 24th, 2019

no-deal pound

The pound is in a weak position this morning, as it is still under pressure amid increasing expectations of a no-deal Brexit.

The possibility of rate cuts later this year are keeping the dollar low, whilst the euro is benefitting from the greenback’s weakness.

Hustings for the Conservative leadership race have already begun around the country, and are due to continue for the next few weeks. Any developments could have an effect on the pound, which is why it’s best to protect your business. Do so by locking in a forward contract or by calling your Business Trader on 020 7898 0500.

GBP: Pound weak after brief rebound

The pound has dropped against both the dollar and the euro this morning after a brief rebound. Expectations of a no-deal Brexit are keeping it low. In his weekly Telegraph column, Boris Johnson reiterated his intentions to take Britain out of the EU by the 31st of October, if he becomes Prime Minister. The pound is still at near five month lows against the euro.

Sterling also slipped on Friday as Boris moved closer to becoming Prime Minister. This increases worries of a no-deal Brexit, a prospect which continues to fare badly with the pound.

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EUR: Euro strong after PMI data

The euro is strong this morning, benefitting from the pound’s weakness and hitting three month highs against the dollar. This comes as the dollar is still suffering due to the Federal Reserve’s stance on interest rates and expectations of possible rate cuts this year.

The euro strengthened on Friday afternoon as PMI data in the Eurozone showed no further signs of deterioration. Despite business activity picking up and bond yields edging up as a result, the data was not strong enough to rule out expected interest rate cuts.

USD: Dollar still suffering due to possible rate cuts

The dollar remains in a weak position this morning, but has benefitted from the pound’s drop. The greenback is still on the back-foot due to possible rate cuts.

The dollar slipped to a two week low on Friday as expectations of a rate cut grew. Economic data did not change the fact that the Federal Reserve are expecting to cut rates this year. The dollar got a brief lift from better-than-expected existing home sales, however IHS market data showed that manufacturing growth weakened, whilst service sector activity slumped to its lowest level since 2016.

This week, the G20 summit will take place. The President Trump and President Xi Jinping are expected to discuss trade issues, so it will be interesting to see if this ongoing US-China trade war can finally be resolved.

For more on currencies and currency risk management strategies, please get in touch with your Smart Currency Business trader on 020 7898 0500 or your Private Client trader on 020 7898 0541.