Pound slumps on no deal Brexit fears

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Jun 20, 2016
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The British pound is under further pressure today against its US counterpart after another round of strong data from the US and expectations that a hard Brexit, whereby Britain leaves the EU without a deal may still be on the cards

British Prime Minister Theresa May has announced that she will once again try to push her Brexit deal through the British Parliament in the week starting June 3rd and with already 3 failed attempts, the chances of the deal passing this time around are not good.

If the vote fails, Theresa May is expected to announce her resignation immediately which will throw the UK into situation of political uncertainty which is exactly what the country doesn’t need at this present time.

This prospect is weighing on the British pound as the chances for a no deal Brexit have now risen

“Another failure will almost certainly mean Theresa May is out. The big question then is who will take her place?” said Jasper Lawler, head of research at London Capital Group.

“Pound traders are growing increasingly nervous that Theresa May will be replaced with a hard-line Brexiteer. This means the chances of a softer Brexit are fading and dragging the pound lower.” He added.

The continuous solid flow of US data hitting the market in recent weeks has also not helped the pounds cause and the trend continued yesterday with solid reading from the real estate sector.

The ongoing trade talks between China and the US have come to a stalemate which threatens to inflict serious damage on the global economy, but investors are seemingly overlooking the situation and instead focusing on real time data hitting the market which is driving the US dollar higher

The Market looks "to have temporarily given up trying to predict the fluid situation that is US-China trade relations and concentrate on the here and now" said OANDA senior market analyst Jeffrey

"The here and now on Wall Street was strong US housing starts and sparkling results from heavyweights Walmart, Nvidia and Cisco Systems, suggesting yet again that despite the international noise, the US economy is still moving full steam ahead." He added.