After enjoying the spotlight over the last few days, the pound lost some of its sheen yesterday as the Brexit process seems to have hit a roadblock and the effect of that was clearly seen on the pound yesterday. This led the GBPUSD pair lower though most of the other currencies gained against the dollar during this period. It remains to be seen how deep the issue is and that is likely to determine how deep the correction is going to be.
Pound Under Pressure as Brexit Plan Fails
The Brexit process looked on the verge of failing with the DUP party blocking the agreement over the Irish borders which is one of the key points of the deal with the Eurozone. With this, it has placed the UK PM May in a spot of bother and the strain on her within and outside the UK is pretty much apparent. Just last week, we were led to believe that a deal had been thrashed out and that the details of the deal would be announced in a week or two but now we see that the Brexit talks have failed to progress with the UK unable to fulfill its commitments.
This increases the pressure on May and also on the UK economy and that is why we saw the pound correcting over the last 24 hours despite the fact that the dollar was under a lot of pressure on its own as well. The dollar is under pressure as the tax reform bill get delayed and also due to the developments over the Flynn issue in the US and this has been dominating the headlines in the region. These are tough times for both the UK and the US but the UK seems to be bearing the brunt at this point of time.
Looking ahead to the rest of the day, we have the services PMI data from the UK and the non-manufacturing PMI data from the US but these economic data are likely to be moved into the background as the traders and the markets focus on the politics that dominate the headlines. We expect the GBPUSD pair to continue to be under pressure in the short term, atleast until the political issues reach some sort of a conclusion.
This article was originally posted on FX Empire