Home Daily Commentaries Brexit chaos sees pound plummet

Brexit chaos sees pound plummet

Daily Currency Update

It was a miserable day for sterling yesterday as chaos enveloped the Conservative party on the back of PM Theresa May’s EU withdrawal proposal being approved by cabinet. With a major hurdle overcome GBP/USD managed to get back above 1.30 during the Asian session, however it soon collapsed as a series of resignations hit the Conservative party. The departure of Work and Pensions Secretary, Esther McVey started the move lower. However it was the exit of Brexit Secretary, Dominic Raab that really hit pound crosses. Despite helping draft the proposal, Raab felt the plan would threaten the integrity of the United Kingdom and could lead to the UK being tied into EU rules well after it leaves the bloc. Arch Brexiteer MP, Jacob Rees-Mogg then added fuel to the fire by calling for a vote of no confidence in Theresa May. Later in the day, May held a press conference where she defiantly stood by her plan amid rumours that she may have announced she was quitting.




Around the time of the press conference GBP/USD bottomed out around 1.2725, however it has since pulled back to 1.2790. The pound is currently a prisoner of politics with all moves driven by events from Whitehall and Brussels. Should we see Michael Gove resign today, and reports be confirmed that 48 signatures have been presented to the Tory backbench 1922 Committee calling for May to resign, then another leg lower could be on the cards.

Key Movers

Unlike the mayhem driving the pound lower the greenback continues to trade at elevated levels as the US economy continues to perform well. There was another strong set of figures by way of Retail Sales with the overall reading showing an uptick of 0.8% m/m and the core number rising 0.7% m/m. With both readings beating forecast by 0.2% the pipeline inflationary pressures this could bring mean members of the Federal Open Mark Committee may look to quicken the pace of interest rate hikes in 2019. Despite this positive news USD/JPY has receded back to 113.35 as Brexit turmoil saw the yen catch a bid.


The euro suffered yesterday as the Brexit chaos in the UK saw the likelihood of a no deal scenario between the UK and EU rise. EUR/USD rapidly dropped from around 1.1350 to a low of 1.1270 before recouping these losses throughout the American/Asian sessions. European Central Bank chief, Mario Draghi has been speaking this morning in Frankfurt where he has highlighted the slowdown in growth seen over recent months in the Eurozone. Despite this markets still expect a rate hike sometime in the second half of 2019. The pounds performance yesterday against the euro was just as terrible as against was against the dollar with GBP/EUR falling from around 1.1490 to close to 1.1250.


Events in London saw AUD/USD slip during the start of the European session however it recouped these losses throughout the day. The next event of note on the horizon from Australia is the release of the latest Monetary Policy Meeting Minutes due Monday night. Current expectations are that the Reserve Bank of Australia will keep interest rates on hold deep into 2019. Given the concerns over the health of the Chinese economy on the back of US President, Donald Trump’s trade offensive it’s unlikely we will see much of a hawkish message from the RBA given the impact Trumps tariffs have had on Australia’s biggest trading partner. GBP/AUD has plummeted to 1.7590.


USD/CAD trades back below 1.32 this morning as yesterday’s risk off trade hit commodity currencies. Todays one release of note is Manufacturing Sales m/m with a modest increase of 0.1% predicted. GBP/CAD trades at 1.6840.


NZD/USD is clinging on to the .68 handle despite the political upheaval on the other side of the globe. The recent strong unemployment number from NZ has been supportive of the kiwi helping it gain around four cents against the greenback over the past month. GBP/NZD is down to 1.8790.

Expected Ranges

  • GBP/USD: 1.2680 - 1.2900 ▼
  • GBP/EUR: 1.1180 - 1.1390 ▼
  • GBP/AUD: 1.7490 - 1.7700 ▼
  • GBP/CAD: 1.6780 - 1.6970 ▼
  • GBP/NZD: 1.8675 - 1.8860 ▼