Pound Limp on ‘Hard Brexit’ Fears

Pound Sterling (GBP)

The Pound fluctuated during Monday’s session while it attempted once again to recover from the ‘flash crash’ plummets seen last Friday. The British currency was able to advance against some rivals but slipped against others.

Market hopes for Britain’s access to the European Union’s single market after the Brexit process is over continued waning on Monday. New comments from UK Prime Minister Theresa May confirmed that there would be no kind of vote on the terms of the Brexit process from British MPs, which trampled hopes of attempting to negotiate single market access even further.

Analysts believe that without single market access, investment will slow and Britain’s deficits will balloon. Papers leaked to the press on Tuesday claimed that a ‘hard Brexit’ could cost the UK Treasury up to £66b a year.

US Dollar (USD)

The Pound to US Dollar exchange rate lost around half a cent in value during Monday’s session, slipping closer towards the new 31-year-low hit on Friday. GBP USD is currently deep in its worst levels since 1985 due to continuously slumping sentiment for the Brexit-battered Pound. In fact, some analysts predict that GBP USD could lose an additional four cents in value over the next few months, especially if US Dollar sentiment continues improving.

Demand for the US Dollar was stronger on Monday despite Friday’s underwhelming NFP scores, as markets and the US media perceived another US Presidential debate win for Democrat nominee Hillary Clinton. Her consistency to US President Obama in economic policies has given markets stability on bets that she will win the premiership. This has also increased bets of an interest rate hike from the Federal Reserve in December.

Euro (EUR)

The Pound to Euro exchange rate fluctuated in a wide range for most of Monday’s session. Sterling initially attempted to make a solid recovery from its worst levels. However, investors lost interest in the British currency towards the end of the day and left GBP EUR slumping even further towards its worst levels.

GBP EUR is currently trending at lows not seen since 2010. The Euro was given a slight boost on Monday as Germany’s trade surplus score improved from 19.5b to 20b in August. Eurozone investor confidence improved from 5.6 to 8.5 in October according to a survey report from Sentix. The Euro was slightly weighed down by an increase in demand for the US Dollar however.

Australian Dollar (AUD)

The Pound to Australian Dollar plunged once again on Monday as risk markets took off following a weekend of good news for the US’ Democrat Presidential candidate, Hillary Clinton.

Due to Clinton’s similarity in stance towards economic policy to the currenct US President, Barack Obama, investors are perceiving a Clinton win in November as increasing hopes for short and long-term market stability. Stable markets are when investors feel safe enough to indulge in risk-correlated assets, which has allowed the Australian Dollar and other risky currencies to advance this week.

The ‘Aussie’ gave up some of its advances on Tuesday however, as markets cooled and Australia’s August home loans results disappointed investors.

New Zealand Dollar (NZD)

The Pound to New Zealand Dollar exchange rate initially attempted to surge on Monday, but as investors lost interest in the Pound towards the end of the day the pair began to trend more flatly near its recent record-lows. GBP NZD continued its advance attempts on Tuesday.

The New Zealand Dollar has been weak compared to other risk-correlated investments over the last few days. Prices of dairy, New Zealand’s most lucrative commodity, slipped by 3% last week. Secondly, the Reserve Bank of New Zealand (RBNZ) is expected to cut NZ interest rates again in the coming months.

Canadian Dollar (CAD)

The Pound to Canadian Dollar exchange rate plummeted in Monday trade, as Sterling was weaker on ‘hard Brexit’ woes once again while news in the oil market continued to boost the oil-correlated ‘Loonie’ higher. As a result, GBP CAD slipped further into lows not seen in three years.

Prices of crude oil jumped 2.5% on Monday due to comments from Russian President Vladimir Putin, who surprisingly expressed support for OPEC’s decision to put a cap on oil output and stimulate prices of the commodity. With hopes that Russia would join the oil production freeze, oil prices surged and the Canadian Dollar gained on Sterling by around two cents.

Disclaimer: This update is provided by TorFX, a leading foreign exchange broker, its content is authorised for reuse by affiliates.

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