Pound drops to new 2-year low

29.07.2019 17:54|Conotoxia Ltd Analyst Team

The British pound is sinking today to all major world currencies, and in relation to the dollar, it has reached the lowest levels for over two years. Statements by politicians may be the reason for the depreciation of the British currency, as more and more is being said about preparing for hard brexit.

Until the end of the extended period of leaving the European Union by the United Kingdom remained three months. Therefore, the new prime minister has little time for possible negotiations, because his main goal is to leave the EU without lengthening the date of separation. As a result, Boris Johnson took steps that could prepare the country to leave without a deal, which could have affected the British currency.

Today, the British Prime Minister, when asked whether he is seeking no-deal brexit, replied that this is absolutely not his goal. Nevertheless, as a responsible politician, he must prepare the country for such an eventuality. Johnson's main goal, as he said himself, is to prepare a new deal. However, as Dominic Raab, the Foreign Secretary added, the European Union must change its position to avoid hard brexit in October. There will be more meetings with European leaders in the coming days.

On the British market, apart from the plunge of the pound, we could saw a strong rise in stock prices on the London Stock Exchange. The FTSE 100 index available on the Conotoxia platform under the symbol UK100 increased to the highest level since August 2018. Only today's increase was over 2 percent, which is the biggest daily rally in six months. This is due to the fact that the index focuses mainly on exporter companies. A weak pound can bring more potential profits to companies.

Emotions related to the British pound may also be provided by the meeting and the decision of the Bank of England this week. The interest rate market estimates that at the beginning of next year we may see interest rate cuts with a probability of more than 50 percent. Currently, the Bank of England may abstain from any decisions until October, but in the meantime may show its latest concerns.

 

Daniel Kostecki, Chief Analyst Conotoxia Ltd.

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

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