Sterling pummelled by Johnson comments. Where next?
Wednesday 31 July, 2019
Daily Currency UpdateGBP - British PoundThe pound has had a torrid 24 hours once again as GBP/USD slipped just over 100 pips to a 28-month low of 1.2119 this morning. This was the largest one day drop in Sterling since March and for the second day in a row, it’s been the worst performing G10 currency. The March 2017 low of 1.2110 will be a key psychological level for GBP over the coming days. The cause of sterling’s woes arises from PM Johnson’s Brexit stance and the very real chance of a ‘No Deal’ Brexit. Johnson has packed his ‘war cabinet’ with loyal Brexiteers and rightwing free marketeers, who are certainly capable of leaving the EU on 31st October without looking back. Sterling took no relief from Johnson’s recent comments on his predicted post-Brexit UK economy. He said the UK will enjoy “the greatest and most prosperous economy in Europe” by 2050. Both sides of the Brexit mess are standing firm with Barnier, Coveney and Juncker all stating that if a withdrawal deal is to be agreed, the UK proposals must be compatible with the EU’s school of thought and that Johnson’s demand to remove the backstop is unacceptable.
Key MoversOther than GBP, the G10 currencies remained fairly muted, with little movement. The Bank of Japan left monetary policy unchanged as expected and the decision was rather uneventful in the market. As policy settings were left unchanged, the GBP & CPI forecasts were trimmed only marginally. The coming days will be important for both EUR and USD. The Eurozone is currently feeling the weight of economic pressure, particularly in Germany. Months of negative data has weighed heavily on the Eurozone's largest economy and there is a chnace this will worsen, depeneding on tarrifs the US impose on European automotives. There is a number of European CPI and GDP figures released on Wednesday. Additionally, US-China trade talks restart today as well as Fed rate cuts today. Expect the market to spike based on both political sentiment and any technical data not already priced into the market.
- GBP/USD: 1.2105 - 1.2280 ▼
- GBP/EUR: 1.0850 - 1.1020 ▼
- GBP/AUD: 1.7580 - 1.7710 ▼
- GBP/NZD: 1.8305 - 1.8490 ▼
- GBP/CAD: 1.5970 - 1.6105 ▼