The pound fell yesterday, giving up almost all its general election gains as the fears of a no deal Brexit re-entered the markets. The new government has decided to set the end of 2020 as a legally immovable deadline, meaning if a deal is not agreed by this point then the UK will leave the EU with no ongoing trade arrangements in place.
The pound fell 0.3% against the dollar as Prime Minister Boris Johnson left his cabinet largely unchanged from before the election, despite having a larger pool to now choose from. Investors had hoped that the influx of new lawmakers and increased majority would reduce the influence of more extreme members of the party. This new law has not filled investors with confidence that this will be the case when negotiations begin in 2020.
GBPUSD opened at 1.3254 and fell across the day, closing at 1.3122
GBPEUR performed similarly, opened at 1.1895 and fell across the day to finish at 1.1766
The dollar made gains on Tuesday, helped by a weakened pound and euro. Strong economic data has weakened the case for the Federal Reserve to lower interest rates. The dollar index was up 0.1% as the euro fell 0.2% against the dollar. US trade representatives have said they may need to raise tariffs on European exports to help deal with the trade deficit with the continent.
Elsewhere the New Zealand dollar and the Swedish crown fell to a one-week low against the dollar.
EURUSD opened at 1.1143 and rose to a high of 1.1170 and the dropped back down to close at 1.1152