The pound once again remained near its four-month low on Wednesday as investors have begun preparing for large swings in the pound with the contest to succeed Prime Minister Theresa May now underway. Most of the candidates wanting to replace her have said that they are happy with a no deal Brexit if Brussels does not re-open negotiations. The implied volatility gauges signalling rising concern about the UK’s October 31st deadline.
The pound slipped 0.2% against the dollar so far lost 3% this month.However, Sterling is currently being supported by two factors, the first being the chances of a second referendum following the strong performance of Pro-EU parties in European parliamentary elections. The second is that the UK parliament has previously voted against a no deal scenario in large numbers.
Media reports this morning have indicated that hard Brexit stockpiling has caused car manufacturing to drop by 45% in April, giving rise to more industry leaders saying the no-deal outcome must be taken off the table.
GBPUSD opened at 1.2640 and rose in the morning to a high of 1.2662 in the early afternoon before dropping sharply to close at 1.2619
GBPEUR opened at 1.1333 and rose across the day, briefly hitting a high 1.1360 before dropping back to close at 1.1337
The dollar rose on Wednesday as trade tensions between the US and China showed no signs of coming to an end. The safe-haven greenback gained after Beijing said it was ready to use rare earth metals as leverage in its trade dispute with the US. The index that tracks the dollar against six major currencies was 0.23% higher, holding near the two-year high it reached last week.
The Italian Deputy Prime Minister has continued his criticism of the EU’s regulations on government spending, he made a defiant statement towards European Commission President Jean-Claude Juncker who said that Italy face fines of up to 3.5bn euros if Italy failed to tighten its fiscal policy. This has added jitters to the stability of the euro which was trading as low as $1.1123 against the dollar.
EURUSD opened at 1.1155 and dropped steadily across the day, closing at 1.1134