Following a rise to 1.3055, the GBP/USD pair dropped following the resignation of UK Transport Minister of Jo Johnson on November 09th 2018.
Prime Minister Theresa May has been negotiating Brexit for some time, and the lack of support has seen ramifications for investors.
The latest move by Johnson was one that was taken due to his lack of faith in the current Brexit proposals.
Johnson feels the current proposals will leave the United Kingdom in a weakened state, as well as years of uncertainty in relation to business.
Brexit secretary Dominic Raab also showed concern surrounding the United Kingdom being permanently locked into a customs union with the European Union.
Pound sterling dropped almost 0.7 percent against the dollar in the pairing.
On 11th November, the GBP/USD was trading in 1.2930 during the early hours, which shown a drop from the 1.2910 which has shown a lot of divergence in relation to Brexit.
There is little in the way of meaningful data coming up for either GBP or USD, other than the UK average earnings data due on Tuesday. Economic data in relation to USD is slowing down as markets prepare for the long Thanksgiving holiday.
Brexit Brings Pros and Cons
Brexit is a subject matter that continues to cause split opinion on where the economic future of the United Kingdom will settle.
Confidence has been seen in the UK due to gross domestic product coming in at 0.6 percent and increase from 0.4 percent that had been witnessed in the previous quarter.
Although the short-term projections of GBP aren’t looking their best, pound sterling has proved to be resilient during an adverse market, so there will be those to continue to root for pound sterling when making investments.
EUR/USD Pairing Also Affected
As well as the uncertainty surrounding GBP, EUR had its own raincloud to contend with in the guise of Italy, with the European Commission asserting that the Italian economy would be slow in 2019, despite the beliefs of the Government.
Italy has been facing financial trauma for some years. Not only does it have one of the biggest debts within the European Union, standing at 2.3 trillion euros, but GDP is lower than it was in 2005.
The Euro has made it through difficult times before, but it’s fair to say that Italy has piled n the pressured when it comes to the financial security of the Euro and the value it offers investors.
Although the running of budget deficits is arguably the right move for Italy, others would disagree. For example, the European Commission states these deficits should not go above 3 percent.