Whereas the Euro and Australian Dollar have been broadly flat versus the US Dollar and the Swiss Franc has eked out a small gain, the Kiwi Dollar and in particular Sterling have continued to slide.
GBP/USD is down to 1.267 – a level last seen in early January – and GBP/EUR is now seemingly well rooted below 1.14. The catalyst for Sterling’s ongoing depreciation is the fact that Prime Minister May’s sweetened Brexit deal has little support within the ruling Conservative Party or the opposition Labour Party and markets seemingly pricing in a greater risk of the UK leaving the UK without a deal. A number of major banks have upped their expectations that this scenario will materialise, with UK due to leave the EU – with or without a deal – on 31st October. The corollary is that there is growing speculation that Prime Minister will be forced to resign, potentially as soon as after tomorrow’s European Parliament elections.
