The pound enjoyed a rare day of gains against both the euro and US dollar following Boris Johnson taking office as UK Prime Minister. In his speech outside No. 10, Johnson reiterated his intentions to strike a new, better Brexit deal with the European Union, but said it was vital to prepare for the remote possibility that Brussels would not renegotiate and the UK was forced to leave on Oct 31st without a deal.
This was his strongest message yet to the EU, saying “We are going to fulfil the repeated promises of parliament to the people and come out of the EU on October 31st, no ifs or buts”. Whilst EU leaders have repeatedly said there is no room for renegotiation, they commonly agree a no-deal Brexit is bad for Europe as well.
GBPUSD climbed over a cent from an early morning low of 1.2403 throughout the morning to reach a high of 1.2519 before closing at 1.2497.
GBPEUR opened at 1.1118 and climbed steadily to 1-month high of 1.1224, closing marginally lower at 1.1205.
Experts believe the pound’s recent rally could be short lived because Johnson faces a great deal of opposition in a heavily divided parliament and the Bank of England have recently turned dovish indicating an interest rate cut could be on the cards.
The euro fell to a two-month low against the dollar on Wednesday as weak economic data reinforced expectations of a rate-cut and other measures to ease monetary policy. The chance of a rate-cut today is currently at 54% according to some analysts and this was increasing due to data from the purchasing managers index hitting a three-month low.
The dollar was largely unchanged against a basket of currencies after three consecutive days of gains. Wednesday’s data was weaker than expected with manufacturing activity slowing and new home sales for the three months previous to June were revised lower. The greenback was 0.1% lower against the Japanese yen and showed little reaction to Special Counsel Robert Mueller saying he had not exonerated President Donald Trump in his investigation into Trump’s possible obstruction of justice.
EURUSD trading was choppy but within a narrow range between highs of 1.1155 and lows of 1.1134.