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Pound Hits Fresh Lows on Brexit Economic Damage Concerns

July 29, 2019 8:46 am | Modified July 29, 2019 8:46 am
EUR, GBP, RUB, USD | BY Ben Scott

The Pound US Dollar exchange rate (GBP/USD) has hit fresh lows for the year as fears mount about the economic damage of a no-deal Brexit. After last week’s measured European Central Bank (ECB) news, inflation data from Eurozone member states could provide some much-needed support for the Pound Euro exchange rate (GBP/EUR) while a rate cut by Russia’s central bank served to heighten volatility for the Sterling to Russian Ruble (GBP/RUB) exchange rate.

Politics, Not Economics Continues to Drive Pound Exchange Rate

It may be a new week, but the agenda hasn’t changed for the Pound US Dollar exchange rate (GBP/USD). Politics, rather than economics, seem set to continue dominating in the short term and the increased likelihood of a no-deal Brexit is taking a toll on Sterling. With senior EU politicians closing ranks once again, the risk of a general election just days before the departure deadline and a new government with liberal spending ambitions now installed, there is something of a perfect storm brewing when it comes to confidence in the outlook for the Pound. Cable (GBP/USD) has broken below the lows of the flash crash at the start of the year, and there’s little to suggest a quick reversal will be seen.

Euro Currency Could be Left Exposed by Inflation Indicators

The Pound Euro exchange rate (GBP/EUR) has seen some moderate selling in recent days, although downside has been limited by the fact that a no-deal Brexit remains damaging for both sides. Sterling may find itself with something to cheer against the common currency later today as Consumer Price Index data from Spain and the Producer Price Index print from Italy are both due for release. Last week, the European Central Bank certainly could have done more in terms of policy easing but showed some restraint. If either of these readings disappoints, then this may rock confidence in the common currency. With Mario Draghi and his team urgently looking for ways to drive inflationary pressure, shortfalls here could convince the market that even more will need to be done after the summer break.

Why Did it Move? Pound to Russian Ruble (GBP/RUB) Exchange Rate

Volatility was seen for the Pound Ruble exchange rate (GBP/RUB) on Friday after the Central Bank of Russia eased back on interest rates. The quarter-point cut had been expected, and it seems likely that further policy easing will be seen this year. Although Sterling found some initial support, this was short-lived with Brexit woes and the attractive 7.25% yield lending support for the Ruble. Volatility continues, with the cross having traded from highs of 78.66 shortly after Friday’s rate call down to lows of 77.74 overnight. GBP/RUB now trades around 78.30.

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