The pound is continuing its poor run of form this week, suffering losses across the board against its peers. Sentiment towards the pound is hugely negative at present with the ongoing Brexit saga now seemingly influencing the UK economy, with growth slowing. To put the pounds move into perspective, in the last two months the home currency has dropped from the high 1.17’s to around 1.11 versus the Euro, a 6% fall. We are now sitting at the lowest level we have seen since December against the single currency. Sterling tells a very similar story against the US Dollar, falling around 5.7% since the beginning of May, the lowest we have seen cable for two years.
There is every chance this negative trend could continue for the pound, as political uncertainty and the potential for a ‘no deal’ Brexit continue to weigh heavily. A new Prime Minister is set to take the reigns on July 24th so we should start to get an idea of the plan going forward from then, but in the short term the outlook is fairly bleak. GDP Figures out at 9:30am for the UK do, however, have huge potential to provide the pound with some much-needed respite, should they surprise on the upside.
The next couple of days have the potential to be very volatile for the high-flying US Dollar. Jerome Powell, Federal Reserve Chairman, will be testifying before Congress with the banks assessment of U.S. economic outlook and their current views on monetary policy. There has been a lot of talk recently that the Fed will look to decrease interest rates at a rapid rate before the end of the year but due to the agreement between the U.S. and China, to hold off new tariffs and return to the negotiating table, plus the increase in the U.S. jobs market, the likelihood of such drastic cuts has greatly decreased. Markets will be waiting for clarity from the Fed chair as to how the bank envisages the future of U.S. interest rate and investors will be poised to either buy or sell the greenback on the words of Jerome Powell.