Pound Shrinks to 11-Month Lows on Brexit Issues

The pound dipped to its lowest level since early September amid increasing concerns over Brexit, coming after a warning from Britain’s international trade secretary who said that a no-deal Brexit was now more likely than not.

GBP/USD reached a low of 1.2956, which was its weakest level since September 4. It was last hovering near 1.2962, or 0.31 percent down.

The weakness in the pound came after Liam Fox stated in an interview that there was now a 60:40 probability that the United Kingdom would leave the European Union bloc without settling an agreement.

He also accused the European Commission of “intransigence,” putting EU rules above economic health and stability.

These comments came after Bank of England Governor Mark Carney cautioned last Friday that there’s an “uncomfortably high” risk of Britain leaving the bloc with no deal.

The pound was also weaker against the euro. The EUR/GBP rose 0.24 percent to 0.8918.

Meanwhile in the euro area, the data that was released on Friday showed that German factory orders stumbled by 4 percent in June, which is the biggest drop in nearly 18 months amid weakening overseas demand.

The surprisingly weak data was another addition to the fears over the economic impact of increasing trade tensions.

The euro traded near four-and-a-half week lows against the greenback, with EUR/USD creeping down to 1.1561.

The common currency has been under a lot of pressure by the diverging monetary policy outlook between the Federal Reserve and the European Central Bank, which has promised to keep interest rates on hold through the summer of 2019.

The dollar stayed firm against a basket of six other major currencies after the most recent US jobs report underscored expectations for the Fed to stick to a gradual speed of rate hikes this year.

The US dollar index went up 0.1 percent to 95.13, re-approaching the one-year high of 95.44 that was reached on July 19.

US job growth was more sluggish than what has been expected in July, the Labor Department said on Friday, though labor market conditions continued to tighten, backing up the expectations for two additional rate hikes from the Fed this year.

The US central bank kept interest rates on hold last week but it said that the US economy was strong, pointing out that it’s on its way to deliver expected rate hikes in September and December.

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