Top Movers

FX round-up: Pound dips as 'no-deal' Brexit risks rise

By Alexander Bueso

Date: Wednesday 21 Aug 2019

FX round-up: Pound dips as 'no-deal' Brexit risks rise

(Sharecast News) - Sterling drifted slightly lower on Wednesday following the release of data showing a narrower than expected fiscal surplus for July as the government ramped up its Brexit preparations.
As of 1702 BST, cable was 0.23% lower to 1.21410 while against the single currency, the pound was slipping by 0.21% to 1.0940.

The US dollar spot index meanwhile was little changed at 98.1730.

"GBP/USD is lower today as the same old Brexit worries are hanging over the pound. Sterling gave some of the gains that were made yesterday, but it is still well above the lows of last week, so traders might be getting used to the idea of a no-deal Brexit seeing as it appears we are heading in that direction," said Fiona Cincotta, senior market analyst at City Index.

But David Madden at CMC Markets UK wasn't buying it, telling clients: "The pound's failure to break through $1.22 suggests that bearish momentum could be here for a while longer."

According to the Office for National Statistics, the UK's public sector net borrowing was negative to the tune of £1.3bn in July, missing forecasts for a surplus of £2.7bn.

And for the first four months of the 2019/20 fiscal year, at £16.0bn the deficit was £6.0bn higher than for the same period 12 months back, as government spending increased at a year-on-year pace of 4.2% compared to the Office for Budget Responsibility's forecast for an increase of 2.7%.

Indeed, some analysts were increasingly expecting a no-deal Brexit, including those at Barclays Research, who the day before had shifted towards a hard Brexit as their 'base case' scenario, projecting that slower growth would force Bank to slash policy interest rates by 50 basis points by mid-2020.

That view was seemingly also taking hold across the Channel, with an official from French President Emmanuel Macron's office telling Bloomberg that the Elysee was also anticipating that the UK would leave the European Union without a withdrawal deal.

The same official also said Macron and German Chancellor were on the same page when it came to Brexit and that France was still expecting London to pay the £39.0bn Brexit bill.

Barclays's Fabrice Montagne and Christian Keller believed cable might fall to $1.09 in the wake of Brexit.

Special promo:
Trading the Forex Market? Visit to get advanced infomation about currencies and the Foreign Exchange Market.


Email this article to a friend

or share it with one of these popular networks:

Top of Page