The pound continued to face heavy selling yesterday as investors who were previously on the fence have now decided that a no deal is too close for comfort and shed their sterling positions. At one point the pound was down 0.5% against the dollar and 0.6% against the euro. Though the pound recovered some of these losses, it has still lost 6% against the greenback since early May.
This has come alongside poor economic data and caused the Bank of England to turn dovish recently, increasing the chances of a rate-cut before the end of the year. Some banks have predicted the pound could fall as low as post-referendum lows of $1.14 but potentially even further to $1.05.
GBPUSD opened at 1.2164, recovering from early morning lows, and remained steady until the early afternoon where it fell to 1.2145 before climbing again to close where it started
GBPEUR followed a similar pattern, opening at 1.0916 and dipping slightly in the late afternoon to close at 1.0910
The dollar remained within a narrow range on Tuesday ahead of today’s rate announcement by the Federal Reserve. A 0.25% rate-cut would be an attempt to protect the US economy from the global uncertainties and trade tensions. Investors are looking for clues from the Fed as to whether this rate-cut is part of a cycle or just a one-off.
The euro was steady above the 26-month low it reached last week of $1.11 but a US rate-cut could push the euro lower. The Japanese yen gained 0.16% against the dollar, benefitting from its safe-haven status but the Bank of Japan is waiting for action from the ECB and the Fed before deciding what action it might take.
EURUSD opened at 1.1144 and fell to a late afternoon low of 1.1142 before recovering to close higher at 1.1151