GBP falls heavily following negative Brexit headlines

Daily Currency Update

GBP - British poundYesterday saw the worst day for GBP/USD exchange rate for 3 months as the pair fell 1% during European trading hours due to a combination of worrying Brexit headlines and talk of the Bank of England (BoE) cutting UK interest rates to negative territory. Following further negotiations between the UK and the EU, Chief EU Brexit negotiator, Michel Barnier, was quoted saying “Not enough progress has yet been made to enter the tunnel”. The tunnel being a Brussels-coined term for intensified Brexit negotiations intended to take place between small teams from the UK and EU, insulated as far as possible from the pressures of leaks and media scrutiny. Later in the day a French minister connected with the negotiations was quoted saying that a no deal was more likely. Alongside this, BoE governor, Andrew Bailey also discussed the possibility of changes to UK monetary policy, including an interest rate cut. These two factors combined means further uncertainty for sterling and as such, GBP/USD fell from a high of 1.3060 to 1.2865. GBP/EUR also fell over a cent from a high of 1.1077 to 1.0966. Looking ahead to today, market movements for the pound will continue to be dominated by Brexit headlines however we also see the release of European industrial production numbers for the month of August. While month on month figures are due to show a fall from 4.1% in July to 0.8% in August, any further downside could see the euro sold off against its major counterparts and perhaps a brief respite for GBP/EUR.