GBP has come under increasing pressure against the USD over recent days, with the pound falling back below 1.30.
This threshold has been a key resistance level for the pair over recent months, with sterling’s drop below it proving that investor confidence in the pound remains extremely fragile.
Brexit delay weighs on pound
The pound’s drop in value this week has come in line with the markets growing realisation that any prospective Brexit deal, likely remains some way off.
UK Prime Minster Theresa May is adamant that the UK will not remain part of the customs union when it does finally break away, a scenario that goes against Labours preferred outcome. With the two major parties at logger-heads over the best way to move forward and a growing split inside the PM’s own Conservative Party, any progress remains minimal and without any real substance.
This continued uncertainty is weighing heavily on the pound, which has struggled to make any kind of impact in the markets. The USD in turn has benefitted from this sell-off GBP, which has helped to facilitate at least in part, this week’s move back below 1.30.
The PM is under increasing pressure to agree a deal by May 22nd otherwise the UK faces having take part in the European elections, which last time out cost the UK taxpayer £109m.
This on-going Brexit saga is likely to have a negative impact on the pound until the time comes when real, tangible progress in talks is made.
Looking at the USD and despite predictions of the US economy slowing considerably during the early part of this year, the US economy has continued to post impressive numbers.
Whilst this impressive will not last forever, the continued strength of the US economy coupled with the uncertainty surrounding the UK at present, is likely to help support the USD against GBP in the short-term.
Whether the pound can make a run back towards 1.30 will most likely be linked to shift in the markets current perception and ultimately, a prospective breakthrough in Brexit talks.
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