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You are here: Home / US Dollar / Sterling Weakness as Brexit Looms

Sterling Weakness as Brexit Looms

October 3, 2016 by Ben Fletcher

Sterling Weakness as Brexit Looms

us dollar notesTheresa May over the weekend announced that the UK would trigger Article 50 before the end of March 2017. Whilst this is merely an announcement of intent it sent the markets into volatility as Sterling managed to lose another cent against the US Dollar, sitting just above 1.27 at the lowest point.

Article 50 will start the official process of the UK leaving the EU and commence 2 years of negotiations between both sides.

The US Dollar despite entering into the final run-up to the election has been incredibly strong sitting very close to the initial Brexit shock level. The recent flurry has arguably been caused by Sterling weakness opposed to dollar strength, none the less could this continue?

The UK released its best manufacturing PMI in over 2 years, however even this was not enough to stop the losses. Just last week the Federal Reserve made it clear that a rate hike looks likely this year after the election, especially if current front runner Hilary Clinton wins. This week there will be significant data in the form of Unemployment Figures and Non-Farm Payrolls. Should this data come out positive then it would further reaffirm the imminent rate hike.

In my opinion there is unlikely to be any resolve for Sterling in the short term and after the US election there could be even more strength round the corner. If Clinton wins the election and the Federal reserve do finally implement a rate hike I would not be surprised to see the GBP/USD rate down towards the 1.25 level.

Filed Under: US Dollar Tagged With: Article 50, Brexit, GBPUSD, Theresa May, USDGBP

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