Pound US dollar exchange rate stumbles amid ongoing Brexit jitters

February 6, 2020
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This dip in the pound comes as GBP investors remain wary as the UK takes its first steps outside of the EU, with fears the UK could still be headed for a no-deal Brexit at the end of the year.

Sterling collapsed at the start of this week following a speech by Boris Johnson in which he sought to strike a tough stance ahead of trade negotiations with the EU.

Speaking in London on Monday, Mr Johnson called for a Canada-style free trade deal, in which the UK would not need to abide by EU rules.

Mr Johnson said: ‘There is no need for a free trade agreement to involve accepting EU rules on competition policy, subsidies, social protection, the environment, or anything similar, any more than the EU should be obliged to accept UK rules.’

The PM also warned that he would be willing to walk away from trade negotiations and revert to World Trade Organisation (WTO) terms if he is unable to secure the kind of deal he wants.

With the EU insistent that any kind of free trade agreement would hinge on the UK maintaining a ‘level playing field’, the chances of Mr Johnson securing such a deal seems slim.

Furthermore, GBP investors fear that Mr Johnson’s reluctance to extend the transition period also limits the chances of the UK and EU reaching a comprehensive trade deal.

At the same time, the US dollar is trending higher this morning after Beijing announced it would be slashing tariffs on hundreds of US imports to China as the government hopes to bolster economic confidence amid the coronavirus outbreak.

Still to come this week we have the publication of the highly influential US non-farm payroll report on Friday.

Following on from a bumper ADP employment report earlier in the week, hopes are high for a strong payrolls print in January, with an upbeat reading likely to see the US dollar maintain its upward momentum.

Looking a little further ahead, the pound could take another tumble at the start of next week with the release of the UK’s latest GDP figures.

Expectations for the last quarter of 2019 are low, with economists forecasting that the UK economy will have stagnated in Q4 in response to heightened political uncertainty.



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