The GBP, or the Great Britain Pound, took a dive on the 16th after there were new reports from Boris Johnson, the newly-elected UK Prime Minister. The PM was looking for a hard line on Great Britain’s situation after the success of Brexit. On the other hand, the Australian dollar declined on a downward spiral from the nation’s central bank.
The GBP Declines after PM Elections
The GBP has declines to the point of 0.7% to 1.323USD, since only last Friday it was at its peak of 1.351USD until after last week’s UK election for Prime Minister. Boris Johnson has a revised Withdrawal Agreement Bill on the arrangements for the UK to leave the EU, which plans to take place by December 31st of 2020.
The move ruins all hopes that Johnson would be able to take a flexible advance to the end of 2020 deadline on Brexit, for a trade agreement with the European Union after Great Britain leaves the regional bloc.
“Common sense suggests that crafting a trade deal would take at least more than a year, so markets had assumed that the transition period will be extended,” stated Masafumi Yamamoto, the chief strategist on currency at Mizuho Securities.
“It seems like the big majority Johnson won is enabling him to take a hard line approach, which the market doesn’t like so much… Considering the UK economy looks set to deteriorate as people and companies start to leave the country because of Brexit, sterling’s short-covering rally is over,” added Masafumi. The GBP last positioned at 1.328USD, which was declined 0.3% from late US levels.
The Australian Dollar Suffers the Same Fate
The Australian dollar managed to lose 0.2% to 0.686USD after the Central Bank of Australia managed to go through another cut in interest rates, as soon as February 2020. During the policy meeting on the 16th of December defined that the board of directors of the central bank are worried that the growth of wage was too weak to revitalize inflation and\or consumption.
Other major currencies have seen restricted movements as investors looked for more details on the temporary trade deal between the United States and China, which was signed last week. The trade deal has generally capped safe-haven currencies, such as the yen, and other rick-sensitive currencies.
Due to both the decline of the Great Britain Pound (GBP) and the Australian Dollar (AUD), many traders are currently anxious about trading with either currency pair.