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GBP/USD plunges to $1.40 as UK-EU Northern Ireland talks on brink of collapse

currency-newsGBP/USD plunges to $1.40 as UK-EU Northern Ireland talks on brink of collapse
The pound fell sharply on Thursday, amidst concerns that UK-EU talks regarding the Northen Ireland protocol are close to collapse.

So far Sterling appears to be holding its ground this morning, with GBP/EUR stable at €1.1594 and GBP/USD flat at $1.4109. GBP/CAD is muted at C$1.7091, while GBP/AUD and GBP/NZD are subdued at AU$1.8228 and NZ$1.9642 respectively.

Coming up, it looks to be a busy day for currency markets today, with investors bracing for the latest US inflation figures and the conclusion of the European Central Bank’s (ECB) June policy meeting.
 

What’s been happening?

The pound opened yesterday’s trading session on the front foot, with Sterling sentiment being lifted by Bank of England (BoE) Chief Economist, Andy Haldane as he made his case for why he thinks the bank will soon need to turn stimulus ‘taps’ off.

But the uptick in GBP exchange rates proved short-lived, as the failure of the UK and EU to resolve the dispute over the Northern Ireland protocol in crunch talks soured investors on the pound.

At the same time, we saw the US dollar initially weaken on Wednesday amidst a softening of US Treasury yields.

However, the ‘greenback’ then rebounded during the US trading session, in anticipation of today’s consumer price index.

In the absence of any notable economic data, movement in the euro was most dictated by its negative correlation with the US dollar yesterday, resulting in the single currency fluctuating throughout the day.
 

What’s coming up?

Centre stage today we have the European Central Bank’s latest rate decision.

No policy changes are expected from the ECB this month, but the bank is expected to publish the conclusion from the its monetary policy strategy review, which could stoke some volatility in the euro this afternoon.

Also in the spotlight is the release of last month’s US CPI figures, which are forecast to report another surge in domestic inflation.

This could propel the US dollar higher today if it intensifies speculation that the Federal Reserve may need to start to tightening its monetary policy later this year.

Meanwhile, UK coronavirus concerns and Brexit uncertainty could leave the pound vulnerable to pressure through the second half of this week.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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