The pound fell further on Monday as investors fully expect Prime Minister Theresa May to be unsuccessful in gaining parliamentary approval for her Brexit withdrawal bill despite claiming the deal presented to parliament will be a “new, bold offer” with an “improved package of measures” in a last-ditch attempt to get her deal passed.
The Labour Party have said they would not support a deal that was fundamentally the same as the ones previously defeated and Boris Johnson currently leads a poll among members for who they wish to replace Theresa May as Prime Minister. This has caused the risk of a no-deal Brexit to rise and therefore investors have reduced the likelihood of an interest rate rise in December from 30% to 11%.
After the talks between the Conservative and Labour parties collapsed last week signalling the end of any chance of a compromise, experts now see only two likely scenarios, a hard or no-deal Brexit or a 2nd referendum. The European elections being held later this week could shed some light on general public’s preference. With the two major parties likely to sustain heavy losses the pro-remain Liberal Democrats and the pro-leave Brexit party are both expected to pick up voters.
GBPUSD opened at 1.2751 and edged lower for most of the day, touching a 3-month low of 1.2713 shortly before close.
Similarly, GBPEUR opened at 1.1423 and dropped across the day, hitting a low of 1.1381, the lowest since late January.
The US dollar was largely unchanged on Monday as investors await further developments on the US-China trade wars and while the Federal Reserve made some mixed comments on the state of the US economy. The dollar was 0.07% weaker against the euro and slightly weaker against the Swiss franc and Japanese yen. Analysts predict that a rate-cut is not imminent and there is still confidence in the economy.
Elsewhere, the Japanese yen was 0.09% stronger against the dollar. The Swiss franc, also a safe-haven investment in moments of global tumult, was 0.23% stronger.
EURUSD opened at 1.1163 and fell slightly in the morning before recovering in the afternoon to close almost unchanged at 1.1168