The pound drifted lower on Monday, ending the run that saw it have its best week in over 2 months against the US dollar and euro.
PM Boris Johnson called on France and Germany yesterday to change their position on Brexit and negotiate a new exit deal for the UK, reiterating that he still wants a Brexit deal with the EU, but if necessary the UK is ready to leave the bloc without one on October 31st.
The UK government said it would end freedom of movement immediately if it leaves the European Union without a deal, prompting concern from business and citizen’s rights groups about the uncertainty that would create. The European Council, which is leading negotiations on behalf of France, Germany and other EU members, said it was ready for a no-deal Brexit but the UK has most to lose under that scenario.
GBPUSD dropped from an early morning high of 1.2170 throughout the morning to a low of 1.2106, the pound recovered slightly in the afternoon to close at 1.2134.
GBPEUR fell sharply from 1.0974 to a low 1.0910 at lunchtime but bounced back later in the day to close at 1.0934.
Boston Federal Reserve President Eric Rosengren said the Fed should be careful not to cut interest rates too much because it would push US homeowners and businesses to take on more debt, making any recession more painful. He added unemployment trends are good, highlighting inflation was moving towards the Fed's target of 2% with the economy growing around 2%. However, experts still believe the Fed will reduce interest rates again at its September policy meeting from the current levels of 2.00%-2.25%.
A gradual rise in risk appetite on hope that central banks around the world would provide monetary stimulus to assist their economies if necessary caused the perceived safe havens such as the Japanese yen and Swiss franc to weaken. The yen fell for a third day in a row, whilst the Swiss franc dropped to a 2-week low against the US dollar. Following its worst week since July, the euro continued to fall against the US dollar.
EURUSD fell from a morning high of 1.1106 to a low of 1.1076.