Sterling Gets Pounded After Brexit Vote Delay

Chart of GBP/USD (British pound vs. U.S. dollar) - sterling pounded
Chart of GBP/USD (British Pound vs US Dollar) – Source:

The British pound had already been teetering on the brink of a breakdown due to Brexit tensions. But Monday was the trigger that pounded sterling down to nearly a 20-month low. Not since April of 2017 has the pound dropped to such a depressed level against the U.S. dollar.

Brexit Breakdown

Driving the plunge was British Prime Minister Theresa May’s confirmation on Monday that the U.K. government would delay a parliamentary Brexit vote originally scheduled for Tuesday. The Brexit process is at the very center of U.K. politics right now. Any breakdown in negotiations has the potential to wreak havoc on May’s government, the U.K. economy and its currency – the pound sterling.

GBP/USD Chart Looking Down

As the GBP/USD chart shows, the pound has been falling sharply against the dollar since April of this year. From that April high just short of the 1.4400 handle, GBP/USD has fallen to its current level under 1.2600, for a drop of over 12% (as of late Monday).

Where does sterling go from here? With Brexit tensions unlikely to go away any time soon, the pound is likely to remain under heavy pressure for a while, especially against continuing U.S. dollar strength. If GBP/USD stays below the key 1.2700 former support level that it just broke to the downside on Monday, the next major bearish target could be as low as the 1.2000 handle.

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