The British pound fell below its 2-year low on Monday. This happened due to worries that the country would withdraw from Europe without any agreements.
The exchange rate has lost more than 100 points in just one day. Regarding the US dollar, the pound is trading at 1.226, against the euro – at 1.102.
The American ICE Dollar index, which shows the value of the currency relative to 6 major world currencies, has grown 0.13%. WSJ Dollar (shows the situation regarding 16 currencies) has increased 0.14%.
According to the British Foreign and Commonwealth Office, the government is preparing the country for a tough withdrawal from the EU. Such a scenario does not provide for an agreement with Brussels. The Prime Minister proposed to carry out the withdrawal quickly and dramatically.
The FCO representatives also said that the authorities were considering ways of direct rule from London in Northern Ireland in case of the “tough” scenario.
We recall that most recently, British Prime Minister Boris Johnson has urged the country to unity. He announced that Wales, Northern Ireland and Scotland would be allocated 300 million pounds. According to some media reports, such measures are aimed at containing the fears of the division of the Kingdom after Brexit.
All parts of Great Britain should leave the EU before the end of October this year. A meeting of the Bank of England will take place this week. But investors believe that monetary policy will remain unchanged.
The same couldn’t be said for the Federal Reserve. Experts believe that the regulator will lower the rate on federal loans to 2-2.25%. The Fed’s meeting will be held on Wednesday. The rumors about the rate cut have been spreading for a long time. Some Fed’s leaders hinted at this in their statements. There are some reasons that can influence the cut of the rate. Firstly, it is about the support of the economy when GDP falls globally. Secondly, inflation below the target mark can cause the rate cut too.
The Bank of Japan will also hold its meeting, which results will be made public on Tuesday.
The material was prepared with the participation of Katya Wilson,
a leading analyst of the brokerage company UFT Group