British Pound Falls Below $1.29 on Brexit Uncertainty

The British pound fell below the $1.29 level for the first time since August 2017 on Wednesday, amid concerns over the UK not being able to settle a deal with the European Union (EU) before its departure in March 2019.

The sterling declined to 0.4 percent to 1.2875 against the US dollar, after marking an 11-month low against the dollar on Monday, with traders associating the decline partly to the possibility of no agreement.

So far this week, the currency has lost more than 1 percent against the greenback. The next technical target would be around 1.2775-1.2800, according to a technical analyst.

Versus the euro, the pound climbed 0.4 percent to 0.9002, while it weakened against most of its Group-of-10 peers.

Currency strategist said the weakness of the British currency versus the euro is a clear sign that the markets are beginning to focus on the pound-specific risks related to a no-deal Brexit, and they have penciled in a 0.91-0.92 high over the coming months to reflect peak no-deal Brexit uncertainty.

Brexit Uncertainty Builds

The sterling has been weighed down this week after British Trade Secretary Liam Fox stated that the UK could exit the EU without an agreement, sparking fears that the trade conflict would hurt the British economy.

Worries grew further after Fox put the risk of a no-deal Brexit to as much as 60 percent, with no plan describing the future relationship between the UK and the EU.

They are short of any meaningful news flow as of the moment and uncertainty is high, which is not a good thing, according to analyst Jordan Rochester.

Rochester stated that while the Brexit hedging continues to take place and data are yet to turn considerably higher to call for an early hike from the Bank of England (BoE), the pound will be on the back foot and head lower.

UK police chiefs have warned that a bad Brexit agreement could put public safety at risk, as it would restrict access to EU-wide databases and security powers.

Still, the sterling could find strength before the weekend as the next run of UK figures are due to be release on Friday.

Meanwhile, the US dollar index, which measures the dollar’s strength against a trade-weighted basket of six major currencies, gained 0.1 percent to $95.10.

Investors had been investing in the greenback as a safe-haven asset while trade tensions between the US and China continued to escalate.

The US Trade Representative's office announced late on Tuesday the US’ plans to start collecting 25 percent tariffs on a new $16 billion of products it imports from China later this month.

The move is the latest by US President Donald Trump’s administration to push China into negotiating trade concessions after it implemented tariffs on $34 billion worth of goods in July, which resulted to promises from China to retaliate.

Versus the yen, the dollar fell 0.3 percent to 110.98, just a day before the expected bilateral trade talks between the US and Japan in Washington.

Japan hopes to avoid steep tariffs on its car exports and talk the US out of demands for a bilateral free trade deal at their meeting on Thursday, but a simple solution for the trade imbalance between the two countries might not be easy to find.

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