The Pound hit an 11-month low against the US Dollar (GBP/USD) on Monday while also falling against the Euro (GBP/EUR) as the UK’s Trade Secretary Liam Fox suggested that a no-deal scenario was now more likely than not. The Pound fell last week when Bank of England (BoE) Governor Mark Carney said there was an ‘uncomfortably high’ risk of a no deal Brexit taking place, and now it seems others are in agreement.
Pound Exchange Rate Forecast to Sink Further if No Brexit Deal Emerges
Just a year ago, Fox said that a deal between the UK and EU would be ‘one of the easiest in human history’, but now seems to have changed his opinion. Fox said:
‘I think the intransigence of the commission is pushing us towards no deal. We have set out the basis in which a deal can happen but if the EU decides that the theological obsession of the unelected is to take priority over the economic wellbeing of the people of Europe then it’s a bureaucrats’ Brexit, not a people’s Brexit – then there is only going to be one outcome.’
Meanwhile, in UK data, the latest New Car Registrations number increased by 1.2% in July on the year, an increase from -3.5%. Director of Autotrader Ian Plumber said:
‘Manufacturers have been racing to clear stock before new regulations on fuel economy and emissions take effect in September, resulting in some great opportunities for consumers.’
German Factory Orders Drop while US Dollar Gains on Trade Tensions
In the Eurozone, today has shown that German Factory Orders contracted significantly in June, coming in at -4.0% on the year after the previous month’s 2.6% reading. The annual figure sank from 4.4% to -0.8%.
Economist Carsten Brzeski said: ‘Even though new orders data are highly volatile, the June report could be a tentative sign of how trade tensions are hitting the German economy. Foreign orders from outside the eurozone dropped by almost 6% MoM. At the same time, domestic orders decreased by 2.8% MoM. With the sharpest drop since January 2017, today’s new orders data do not bode well for German industry going into the second half of the year.’
In the US, trade tensions are still rife and with the US economy still registering strong figures, investors have put their eggs in the Greenback’s basket. Trade war worries are most likely to impact emerging markets and other exporting nations, rather than the US and the Dollar.
The Pound to US Dollar (GBP/USD) exchange rate is trending at 1.2925. The Pound Sterling to Euro (GBP/EUR) exchange rate is residing at levels of 1.1198.