The Sterling Pound’s Performance As Brexit Concerns Weigh In Again
Analysts are growing concerns about the Sterling Pound’s performance as the Brexit issue adds to the pressure. The British currency hovered near its six-month low against the US dollar.
The pound’s performance reflects the pressure that it has been facing about the increasing likelihood that Brexit evangelist Boris Johnson will become the next British Prime Minister. That might happen as soon as the end of July.
There is also pressure on the Pound due to the Bank of England’s interest rate cut signals and poor economic data.
Jordan Rochester of Nomura believes that the GBP has already been trading at dangerous levels and that it might even go lower. He also noted that the GBP will likely hit new lows due to the risks of a no-deal Brexit.
There are other factors that will likely affect the Pound’s performance such as the expectations of high inflation levels, as well as the closeness of the CPI to the CBOE target. These factors may keep the Central Bank from making any immediate decisions.
Investors might look for opportunities to make some gains through the GBP in the period before the Brexit talks pick up the pace again.
EUR/GBP performance and outlook
This week kicked off with the GBP showing a strong rally against the Euro on Monday and part of Tuesday, a refreshing performance for Pound investors. Analysts expect the GBP to continue rallying over the short term and demonstrating strength against the Euro, but the Brexit issue will likely disrupt the performance sometime soon.
Although the GBP has been heavily hit by the Brexit issue over the past few months, the Euro will also be exposed to the effects of Brexit a few weeks from now.
The Pound’s performance against the US dollar was also negatively affected over the past few months with the Brexit pressure weakening it against the Greenback. Last week demonstrated an overall bullish performance in the GBP/USD, thus indicating the GBP gained some ground against the US dollar.
The greenback gained back its momentum against the Euro on Friday, thus pushing it down the GBP/USD chart into a bearish trend, with the price reaching as low as 1.24232 at the time of this press.
Meanwhile, USD surged to around 108.990 against the Japanese Yen last week, thus gaining significant ground against the haven currency. However, plans by the Federal Reserve to slash interest rates before the end of July wiped off some of the USD’s gains against the Yen.
Fed Chairman Jerome Powell pointed out that the uncertainties that the U.S. is currently facing have a lot to do with the decision to lower interest rates rather than to increase them.
The Japanese Yen also gained even more against the US dollar towards the end of last week after comments by Charles Evans, the president of the Federal Reserve. He stated that more than one rate cut is necessary for the U.S. to increase inflation.