The British pound today weakened against the US dollar as it reacted to uncertainties related to the UK government’s stance on the Brexit negotiations. The pound was weakened further by a rally in the euro, which was triggered by positive Eurozone PMI data, and market expectations of a QE tapering announcement by the European Central Bank.
The GBP/USD currency pair lost over 50 points at the height of its decline and was on a downward trend at the time of writing.
The British pound’s decline was largely triggered by markets expectations that Theresa May‘s government would publish a paper outlining its stance on the Brexit negotiations. The markets expected that the UK government would concede that EU laws would continue to affect the UK long after the Brexit process was concluded. The dovish stance taken by the Bank of England recently also negatively affected the pound’s performance.
The US dollar was not much stronger than the pound, as the currency pair’s decline was largely caused by the significant rally in the EUR/GBP pair. The euro was much stronger than the British pound even as Markit Economics released positive flash PMI data on the Eurozone. The euro’s strength was also attributed to the market expectations that the ECB would soon announce a tapering of its quantitative easing program.
The currency pair’s future performance is likely to be affected by the release of the UK’s second quarter GDP data scheduled for tomorrow.
The GBP/USD currency pair was trading at 1.2788 as at 16:57 GMT having dropped from a high of 1.2834. The EUR/GBP pair was trading at 0.9224 having rallied from a low of 0.9160 earlier today.
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