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British Pound Stabilising as Data Lays Bare Brexit Damage

July 31, 2019 10:03 am | Modified July 31, 2019 10:03 am
Brexit, EUR, GBP, NZD, USD | BY Lauren Bessent

The British Pound may have found some stability in recent hours against both the Euro (GBP/EUR) and US Dollar (GBP/USD), but economic data is laying bare the real damage Brexit uncertainty is having on the economy. The Federal Reserve’s tone will provide further direction for the Greenback, while the Pound is managing to post some meaningful gains over the New Zealand Dollar (GBP/NZD).

UK Investment Falling Amid Brexit Uncertainty

Following heavy selling at the start of the week, the Pound Euro exchange rate (GBP/EUR) may have reached something of a plateau, although the release of fresh economic data overnight pointing towards the stresses being placed on the country’s manufacturers as a consequence of Brexit has the potential to initiate a further wave of selling. The Society of Motor Manufacturers and Traders reported that investment in the nation’s car industry fell by 70% in the first half of 2019 off the back of worries about a disorderly Brexit. Hard facts like this reiterate the scale of the economic risk faced by the country if the political trajectory continues to follow the same path, leaving Sterling exposed to further losses as a result.

Fed in Focus with US Rate Cut Widely Expected

The British Pound US Dollar exchange rate has also been relatively stable after heavy losses seen at the start of the week, although the Federal Reserve’s call on monetary policy later today could provide some fresh direction here. Initial suggestions had been that interest rates may be cut by as much as 0.5% although expectations have been scaled back to a more conservative quarter point reduction. That is already priced in, but any shift in the narrative in the subsequent press conference has the potential to direct the US Dollar. Suggestions that policy easing will need to continue after the summer could present some weakness for the Greenback, driving GBP/USD a little higher as a result, while any indication that this is a ‘one and done’ move stands to further pressure currencies like Sterling in the near-term.

Why Did it Move? Pound to New Zealand Dollar (GBP/NZD) Exchange Rate

The Pound New Zealand Dollar exchange rate (GBP/NZD) has been rallying over the last 24 hours, having hit fresh lows for the year early on Tuesday morning. The latest support came from the release of the latest ANZ Business Outlook Survey, showing that sentiment in the construction sector was at its lowest in a decade and that the outlook for the broader labour market is also deteriorating. After trading down as low as 1.8275 on Tuesday, the Pound – Kiwi Dollar now sits at 1.8430.

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