The pound fell more than 1% against the dollar on Wednesday as investors started pricing in many more months of Brexit uncertainty and a general election with a mixed possibility of outcomes. Although the Supreme Court ruled against Boris Johnson, he did not resign as some had predicted. Therefore no-deal Brexit risk has not changed, and the opposition parties do not want an election until Johnson has requested an extension from the EU.
This current deadlock has no immediate resolution, with the mid October deadline still in place for the Prime Minister to present a deal to parliament. The EU maintain that he has thus far brought no new proposals. If there is no new deal after the EU summit on 17th-18th October, he will be legally required to request an extension from the EU, but he has currently claimed he will refuse to do so, with the government hoping to find loopholes in this legislation.
GBPUSD opened at 1.2441 and fell sharply across the whole day, closing at a low of 1.2358 before levelling out for the evening
GBPEUR opened at 1.1314 and fell to an afternoon low of 1.1266 before recovering to close at 1.1289
The pounds weakness partly came from a stronger dollar which was benefitting from safe-haven investors who were worried about the impeachment inquiry against President Donald Trump. He was recorded encouraging the Ukrainian president to investigate Democratic presidential candidate and former Vice President Joe Biden. Investors have sought safe-haven assets which boosted the dollar index 0.7%.
Part of the dollar’s strength also came from the markets settling down after the initial knee-jerk reaction to the news of the inquiry. Elsewhere the euro was down 0.68% against the dollar as concerns about the state of the eurozone economy are running high.
EURUSD opened at 1.0997 and dropped slightly in the morning before sliding more sharply in the afternoon to close at a low of 1.0945
