The Pound Continues to Fall

Xe Corporate Europe

September 3, 2019 4 min read

Yesterday saw the ‘Battle of Brexit’ commence, with PM Boris Johnson standing firmly behind his belief of leaving the European Union on October 31st. However, in No 10's judgement, if MPs including many of his former colleagues, defeat him this week and succeed in their move to make leaving the EU without a deal illegal, their best move is to call an election and call one quickly, as soon as 14th October. Jeremy Corbyn, despite clear warnings from Tony Blair yesterday, insists that the Labour party are prepared and ready for a general election.

So, what could this mean for the pound?

The pound fell significantly yesterday, falling to two-year lows of 1.1970 against USD and down over half a cent against EUR to 1.0947. The main macro-economic driver behind this depreciation was the questions surrounding Brexit, with all eyes firmly on the outcome of today’s parliament sessions.

The selling pressure was aggravated further following the disappointing release of UK manufacturing PMI, which dropped to more than a seven-year low level of 47.4 in August. To add to the uncertainty, the PMI data released yesterday has sparked further questions for investors over a potential recession on the horizon.

Supply chain fears have reached a point now where there has been some discussion on the stockpiling of food – whether businesses agree with this notion, it could be time to think seriously about what happens in a practical sense if we see worst case scenarios materialise.


Cable dipped below 1.2000, hitting the lowest since 2017 ahead of a crucial day in Parliament. The current support level is at 1.1967, which if broken could see Sterling break down to new lows of 1.1895. These are the lowest levels the GBP has priced against the USD since the 1980s.

Alternatively, should we see a positive outcome of today’s parliamentary sessions, a breakthrough of the current resistance level at 1.2016 could see cable rally back above 1.21.  


GBP/EUR is currently trading around the 1.0946 levels, considerably lower than the 1.1060 levels trading opened at yesterday. The current support level is at 1.0916, which if broken could see Sterling break down to new lows of 1.0854.

Again, should we see a positive outcome of today’s parliamentary sessions, a breakthrough of the current resistance level at 1.1060 could see cable rally back above 1.11.


The pair is grinding its way to new lows under 1.0950 – the lowest since 2017. The US dollar is strengthening across the board. The European Central Bank's September 12th  decision is eyed.

Yesterday, the final reading of the IHS Markit's Eurozone Manufacturing PMI came in at 47 to match the previous estimate and the market expectation. However, the same PMI data for Germany ticked down to 43.5.

Commenting on the data, "Trade wars and tariffs remain the biggest concerns among producers, and the escalation of global trade war tensions in August encouraged further risk aversion," said Chris Williamson, Chief Business Economist at the IHS Markit.

Meanwhile, following last week’s dovish commentary from ECB officials, Reuters today reported that eurozone money markets were now pricing a 60% probability of a 20 basis-point rate cut in September while seeing at least a 10 basis-point rate cut as imminent.

Today, Christine Lagarde, who is expected to become the next president of the ECB, will speak in front of the Committee on Economic and Monetary Affairs (ECON). Later in the day, the IHS Markit and the ISM both will be releasing their August PMI reports for the US.

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