The pound hit a 30-month low against the dollar on Thursday, dropping below $1.21, down 0.5% at one point in the morning. Concerns remain that the UK is heading for a no-deal exit from the EU and the reduced economic growth forecast from the Bank of England. The central bank kept rates on hold at 0.75% on Thursday but did not indicate that it wanted to lower rates like many other central banks have done.
Markets are predicting a 0.25% rate-cut by the end of January 2020, aided by falling manufacturing output. The pound did manage to recover its losses later to end the day positively, but this morning is under pressure again. A parliamentary by-election victory for the pro-EU Liberal Democrat Party has reduced Boris Johnson’s working majority in parliament to just one, further mystifying whether his approach could really get past lawmakers or if a general election is due shortly.
GBPUSD opened at 1.2118 and reached a low of 1.2090 in the early afternoon but then recovered to close at 1.2142
GBPEUR opened at 1.0977 and was little changed across the day, closing at 1.0969
The dollar fell against the yen on Thursday after President Donald Trump threatened a further 10% tariff on $300 billion worth of Chinese imports on September 1st. The dollar was 1.32% weaker against its Japanese safe-haven rival and the dollar index fell 0.2% after Trump made these comments. The index had hit a two-year high after the Federal Reserve indicated they would not be lowering rates.
The weakness in the dollar translated to a stronger euro, however investors are still expecting the European Central Bank to take a more aggressive stance on monetary policy than the US Federal Reserve. It was up 0.13% against the dollar in the morning.
EURUSD opened at 1.1037 and was unchanged in the morning, however the pair then jumped sharply across the afternoon to close at 1.1068