Brexit is once again dominating the agenda for the British Pound, and with no-deal looking more likely, the associated economic shock is weighing on exchange rates almost right across the board. Sterling is down to two-year lows against the US Dollar (GBP/USD) and six-month lows against the Euro. Even the Turkish Lira (TRY) has the upper hand on the Pound (TRY/GBP), although the Sterling to Rand (GBP/ZAR) exchange rate is one notable outlier. There’s an expectation that the South African Reserve Bank (SARB) will adopt a more dovish policy stance tomorrow embarking on what could prove to be a run of rate cuts as a result.
Update: By the close of the European trading session, the Pound was climbing against the US Dollar, Euro, and South African Rand, while falling against the Turkish Lira still. Today’s UK Consumer Price Index inflation reading held steady at 2.0% in June, while the core inflation measure rose from 1.7%to 1.8%. On the month, June flatlined at 0.0%. Meanwhile, the UK’s House Price Index slipped in May, from 1.5% to 1.2%, below the 1.3% forecast.
Update: The Pound continued to rise against both the Euro and US Dollar (GBPEUR, GBPUSD) in Thursday’s European session. MPs backed an amendment that could prevent Conservative Party frontrunner Boris Johnson going ahead with a no-deal Brexit by shutting Parliament down for several weeks in October.
Update: Friday morning has seen the Pound trade lower against the US Dollar, South African Rand, and Turkish Lira. Yesterday, the Pound slipped significantly against the Turkish currency after US President Donald Trump suggested he wasn’t looking to implement sanctions on Turkey just yet.
As No-Deal Brexit Looks More Likely, Pound (GBP) Stumbles
The British Pound US Dollar exchange rate (GBP/USD) slumped to two-year lows yesterday after the two Conservative leadership candidates both toughened their rhetoric over Brexit. This is seen as increasing the chances of an economically damaging no-deal Brexit, although it should also be recognised that parliament remains opposed to any such plan. The incoming President of the European Commission has also acknowledged that she will be willing to look at a further extension to the Brexit timetable if good reason exists to do so. Uncertainty has once again put the Pound under pressure, but the scope for at least some modest reversions shouldn’t be entirely overlooked.
Gloomy Eurozone Outlook Fails to Support Sterling
Despite the forward-looking ZEW surveys for the Eurozone coming in even worse than had been expected, this failed to provide any meaningful support for the Pound Euro exchange rate (GBP/EUR) on Tuesday. Again, the threat of a no-deal Brexit dominated sentiment and attention will today switch to the release of UK inflation data. In the event that this slips below the 2.0% target, speculation around a Bank of England (BoE) rate cut will likely increase, adding further downside pressure onto the British Pound exchange rates as a result.
Sterling Slumps Against Turkish Lira (GBP/TRY)
The current theme of negativity surrounding Sterling is wide-reaching, with the British Pound Turkish Lira exchange rate (GBP/TRY) finding itself under pressure yesterday and falling by as much as 1.5%. Again, this is a story of Sterling weakness rather than Turkish Lira strength, but with criticism of Turkey’s decision to buy a Russian missile system growing and the country risking its position in NATO as a result, the Lira could yet find difficulty in sustaining these gains.
Why Did it Move? Pound to South African Rand (GBP/ZAR)
The Pound South African Rand exchange rate fell yesterday off the back of Brexit speculation, but losses have been short-lived. The South African Reserve Bank is due to meet tomorrow to discuss interest rate policy and a cut in borrowing costs is widely expected. However, the forecast quarter-point reduction is largely seen as being insufficient to stimulate an economy beset by structural challenges, suggesting more dovish moves may be seen in the medium-term. Having traded as low as 17.200 yesterday, GBP/ZAR now trades almost 1.0% higher around 17.350.