The pound continued to fall on Tuesday, breaking through technical support levels to hit a one-month low against the dollar. Prime Minister Boris Johnson is due to reveal plans of a “final” negotiating offer to the EU, but investors are still concerned the risk of a no deal will return to the table if the EU does not like the government’s new proposals.
The pound fell 0.6% against the dollar and 0.7% against the euro. The government’s new proposals supposedly include a new proposal to be rid of the controversial Irish backstop, but EU officials have sounded sceptical about the chances of a breakthrough. The government has also introduced the idea of customs checks at the Irish border which the Irish government has dismissed as a possibility.
GBPUSD opened at 1.2295 and fell sharply to a low of 1.2213. Across the afternoon the pair recovered to stabilise around 1.2277 shortly after closing.
GBPEUR opened at 1.1292 and followed a similar pattern, hitting a low of 1.1198 and steadying around 1.1235
The US dollar index gained 0.1% in early trading yesterday before data showed that US manufacturing in September had contracted at the fastest pace in over ten years. This means the US has followed suit with many other global economies who have suffered in the wake of the US-China trade war. Although the Federal Reserve has maintained that interest rates are currently at the right level, there will ultimately have to be an acknowledgement of widespread weakening in aspects of the economy.
The euro fell 0.1% against the dollar and elsewhere the Japanese yen gained 0.2%, benefitting as the safe-haven alternative the US dollar. However, the Swiss franc, which normally would have experienced the same, fell 0.4% against the dollar.
EURUSD opened at 1.0887 and after a steady morning and then climbed sharply in the afternoon to close at 1.0938
