After hitting a high of almost $1.44 against the US dollar last week the British pound has made a stunning reversal and has slumped down below the $1.40 mark and the way things are looking, we may not have seen the bottom yet.
The turning point for the British currency began last week with numerous releases of disappointing economic data but it was comments from Bank of England Governor Mark Carney about the central banks futureplans for interest rates the really piled pressure on the pound
“I don’t want to get too focused on the precise timing, it is more about the general path. The biggest set of economic decisions over the course of the next few years are going to be taken in the Brexit negotiations and whatever deal we end up with. And then we will adjust to the impact of those decisions in order to keep the economy on a stable path,” noted Governor Carney.
The next bank of England meeting is now shaping up to be a real blockbuster and before Carney’s comments the market had been pricing in a more than 90 percent chance that higher rates were coming next month but now the odds have fallen dramatically.
Also, affecting the pound today is reports that Theresa May’s plan regarding the Irish border will be overwhelmingly rejected by the European union when the 2 sides meet next month which threatens to throw the Brexit negotiations into turmoil.
Without the border question settled, talks of a trade agreement between the EU and Great Britain will come to a halt and this is likely to put further pressure on the pound.
“With UK economic growth lagging behind all other major economies, and the path of Brexit once more looking distinctly rocky said Rebecca O’Keeffe, head of investment at interactive investor.
“The sterling’s recent strength is in danger of reversing sharply, particularly if Prime Minister May’s position comes under further pressure,” she added.
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