Published: Sun, August 12, 2018
Business | By Eloise Houston

Sterling slides below US$1.29 as Brexit sell-off worsens

Sterling slides below US$1.29 as Brexit sell-off worsens

The number of people recruited for permanent jobs in Britain grew at its slowest pace in nine months in July, reflecting record low unemployment and a shortage of migrant workers from the European Union, a recruiters' body said on Wednesday. At the time of writing on Thursday afternoon, GBP/EUR trended in the region of 1.1120.

Warnings this month from Bank of England Governor Mark Carney and trade minister Liam Fox, that the prospect of a no-deal Brexit was growing, triggered the recent slide.

While there appeared to be no notable trigger to yesterday's pound sell-off, analysts suggest it is likely a result of growing anxiety that time is running for the United Kingdom to avoid a "no-deal" Brexit.

As a result, investors have been panicking about the lack of recent progress in Brexit negotiations.

With the no-deal Brexit scenario becoming the official strategy, the GBP/USD is likely to be exposed to further selling pressure as it is trapped in the downward sloping channel.

Still, analysts expect the Pound's recovery was limited and was due to rebound rather than any optimistic news.

Sterling's price is suffering from ongoing concerns about a potential no deal Brexit.

The Euro (EUR) has remained relatively stable recently, leaving its exchange rates at the mercy of developments overseas, and the European Central Bank's (ECB) latest economic bulletin this morning served to highlight the Eurozone's economic trajectory.

This has largely been due to market concerns about the possibility of a US-sparked trade war lightening somewhat, and United States protectionist rhetoric with ally nations softening.

'Downside risks to the global economy have intensified amid actions and threats regarding trade tariff increases by the United States and possible retaliation by the affected countries, 'This week's Eurozone data hasn't been hugely supportive either, with German data from June suffering a brief slump that has not had a perceived impact on the Euro outlook.

Friday's United Kingdom datasets include United Kingdom trade balance, Gross Domestic Product (GDP) growth, manufacturing and industrial production results from June.

McCafferty said that no-deal Brexit would cause short-term economic disruption and that the market expectations for a couple of rate hikes during the next two years are acceptable.

This would likely turn around some of the Pound's poor form, and a favourable uptick in the industrial production figures might also serve Sterling well against its major peers ahead of the weekend.

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