The pound fell on Thursday after having traded at five-month highs earlier in the day on the back of the UK government reaching a deal with the EU. However, it was soon after revealed that the DUP, who the government rely on for a majority, will not be supporting the deal. This makes its likelihood of passing through parliament much less likely and therefore the pound lost support. Falling 0.2% against the dollar.
MPs will now meet on Saturday to discuss and vote on the deal, there is a lot of speculation about potential outcomes with most analysts believing that it will just fall short of a majority. Opposition parties have all said they are voting against it but have also proposed various amendments which include an extension request, a general election and a second referendum. The vote will take place close to midday.
If a deal is approved by parliament then investors predict a jump in the pound to anywhere between $1.30-35. If the risk of no deal returns, then the pound could fall as low as $1.20 and beyond.
GBPUSD opened at 1.2787 and reached a morning high of 1.2938 before dropping back slightly in the afternoon to close at 1.2849
GBPEUR opened at 1.1542 and followed similarly, hitting 1.1633 before closing at 1.1550
The dollar fell sharply against the euro and sterling on the back of the agreement between the EU and the UK. Though there is still work to be done in parliament, the deal was enough to make the euro gain 0.46% against the dollar and 0.12% against the pound.
The dollar lost 0.7% against a basket of currencies as data continues to show negative trends in the US economy. After Wednesday’s poor retails sales data, yesterday US homebuilding fell from a 12-year high in September as well as factory activity declining in the mid-Atlantic region in October.
Elsewhere the Norwegian crown hit an all time low against the euro, with some investors blaming trade tensions and others unable to explain the magnitude of the drop. The Australian dollar gained 1.02% against its US rival after positive jobs data reduced the chances of an interest rate drop next month.
EURUSD opened at 1.1076 and jumped sharply to 1.1121 in the morning, remaining close to that level for the rest of the day and closing at 1.1128