The British Pound rebounded in January as the market expected that a ‘no deal’ Brexit was becoming increasingly unlikely. However, sterling has been trickling lower in recent days as fears mount over the possibility of leaving the EU without a deal on March 29th.
Yesterday’s UK Services PMI missed expectations falling to to 50.1 versus 51.1 forecast, pressuring sterling lower towards 1.3000.
In Tuesday trading cable (GBP/USD) lost its hold above the the key psychological 1.3000 level, reflecting concern in the market over whether the UK and EU will reach a compromise to keep the UK in the customs union.
In November the Bank of England warned that in the event of a ‘disorderly Brexit’ the UK economy could shrink by 8%, house prices could fall by almost 30% and that the pound could lose 25% of its value.
Uncertainty looms over whether the UK Prime Minister Theresa May will be able to get the necessary concessions from the EU to secure backing for a Brexit in the House of Commons.
Theresa May is set to update parliament on February 13th, with the next crucial vote taking place on February 14th.