GBP/USD Hits 4-Month Low as Brexit Talks Collapse

Alan Penny

17 May 2019

2 min read

The British Pound traded as low as $1.2760 against the US Dollar on Friday. This marks not only a 4-month low for the currency pair, but also a ninth straight losing session. This is the longest consecutive losing streak this century. Hopes of any kind of cross-party deal look to be at an end.

Extensive Negotiations Reap no Reward

Six-weeks of talks between the ruling Conservative party and the opposition Labour party came to an end on Friday. Their respective leaders, Prime Minister May, and opposition leader Jeremy Corbyn, failing to strike a deal. This marked the continuation of an ongoing saga which has created a very tumultuous market for traders. After going “as far as they could go” with negotiations, the Labour party are now set to continue their opposition of the Brexit proposal as set out by Theresa May.

Hopes had been pinned on a successful outcome to negotiations which may have stabilized the market sentiment moving forward. This hope however, simply did not come to fruition yet again. Skepticism continues to grow, and this has been market by the fall in GBP/USD trading on release of the news.

PM Pressing Ahead Despite Setbacks

Despite three previously failures in the House of Commons with votes on backing her negotiated Brexit deal, May is expected to continue trying to battle a deal through. This comes even as her rumored departure seemingly looms. Sources close to the government say that she has been told to depart from her position by June 30th at the latest. This would be the deadline day for her having a deal accepted by parliament prior to British MEPs taking their seats in Brussels.

Whether she manages to pass a deal or not, Theresa May’s remaining time in office will be a seemingly fraught one. Regardless if she manages to pass a Brexit deal or not, it would appear that the end of her leadership is fast approaching. Depending upon the exact outcome, and who takes over, a change in leadership may be ideal for the British Pound.

Getting Sterling Back on Track

With the ruling conservative party set to lose a sizable amount of power in the upcoming elections, the future of Sterling very much hangs in the balance. This could lead to many more ups and downs in the coming days and weeks. Much of what happens next would appear to rely on the results of these elections and the reaction of the current leadership. Pro-Brexit figures such as Nigel Farage and his newly formed Brexit party are among those backed to win big in the upcoming vote.

This potential turnaround, coupled with the confirmed candidacy of well-known Brexit backer, Boris Johnson in a bid to become the nation’s next leader, could be positive news for the GBP. The pro-British stance which this change would assume would only be likely to boost the pound. A return to the March highs of $1.34 certainly seems possible if more concrete progress can be established.

Written By
Alan Penny

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