The pound was once again unmoved near its four-month lows as investors wait for the result of the contest to succeed Prime Minister Theresa May. The new leader is likely to want a harder split with the EU, which raises the chances of a hard Brexit as well as a snap general election. Boris Johnson remains the frontrunner but is currently in the headlines for being taken to court for misconduct in public office based on claims made during the referendum campaign. The pound remains on course for its biggest monthly drop since June 2018.
Gauges of expected swings in the pound over the next few months has also remained steady as analysts say that the probability of no deal and no Brexit have both increased and that’s why volatility remains low. Betting heavily on either outcome would be extremely risky at this stage. Chancellor of the Exchequer Philip Hammond warned those competing for leadership that a no-deal Brexit would threaten the United Kingdom’s cohesion and that they should tone down irresponsible spending pledges.
GBPUSD opened at 1.2624 and was stable in the morning, hitting a brief low of 1.2589 after news emerged of Boris Johnson’s court appearance in the late afternoon. This was followed by a recovery to close at 1.2616.
GBPEUR opened at 1.1340 and followed a similar pattern, hitting a low of 1.1319 but closing at 1.1325
The dollar was also little changed on Thursday, on course for its fourth consecutive month of gains. Safe-haven currencies remain in demand amid trade tensions, with investors again not wanting to take up any substantial position without a resolution. The index that tracks the dollar against six major currencies was down 0.01%, but the dollar increased an overall of 0.76% in May despite investors betting on rate cuts by the Federal Reserve.
The euro was marginally up yesterday but worries about a slowing eurozone economy and the rise of euro-sceptic political parties within EU member countries have hurt the common currency. Other safe-haven currencies like the Japanese yen and Swiss franc have suffered slightly amid US dollar demand this month.
EURUSD opened at 1.1132, with the brief afternoon dip reaching a low of 1.1119, but closing slightly higher at 1.1136
