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Pound crashes to 27 month low

GBP - British Pound

You have to go all the way back to April 2017 the last time that sterling was so low against the US Dollar. Against the Euro, things aren't much better either with GBP/EUR also sinking to a fresh six month low. This all comes off the back of comments made from both Tory leadership candidates yesterday where both men vowed to remove the Irish backstop deal in their renegotiated deals. These comments spooked investors with some banks now forecasting a 50% chance of a no-deal Brexit.

Yesteday's bullish job report was not able to stop the pound's rut and indeed it underscores the fact that investors are focusing predominantly on the risk of no-deal Brexit scenario with sentiment taking the front seat ahead of data.

Both Johnson and Jeremy Hunt appear to be positioning themselves as the larger Brexiteer and despite the moves yesterday the currency markets are quite flat compared to historical volatility levels. The risk for investors could be the return of this volatility in September/October alongside sterling weakness.

Key Movers

There may be one shining knight however who could and probably will play a big role later in the year as the October 31st deadline approached. Yesterday Ursula von der Leyen was confirmed as the new president of the European Commission and the first woman to take the role has indicated that she'd allow a Brexit extension and would look to avoid a hard Brexit.

Elsewhere in Europe Francois Villeroy, a member of the ECB, spoke yesterday stating that monetary policy or the ECB slashing interest rates and ultra loose monetary policy cannot do everything. This mirrors remarks constantly made by the ECB's Draghi who often says that fiscal reforms and spending needs to be utilised alongside monetary policy.

Expected Ranges

GBP/USD: 1.2355 - 1.2420 ▼

GBP/EUR: 1.1040 - 1.1120 ▼

GBP/AUD: 1.7690 - 1.7780 ▼

GBP/NZD: 1.8440 - 1.8530 ▼

GBP/CAD: 1.6175 - 1.6250 ▼