GBP/USD stabilises at $1.31 over no-deal Brexit fears

Sterling has found support at £1.31 against the dollar on Thursday, though the pound has lost its post-election gains on renewed fears of a no-deal Brexit on January 31.

GBP/USD finally stabilised on Thursday at a touch under $1.31 levels, with the pound seeing its post-election gains eroded by renewed fears of a no-deal Brexit.

Sterling rose to a high of $1.35 last week, driven by the Conservative Party securing a landslide victory in the UK general election on December 12.

The pound also lost ground against the euro, falling to €1.18 after ticking up €1.20 levels in the wake of the Tories victory.

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No-deal Brexit fears return

With his Conservative Party controlling a significant majority in the House of Commons, British Prime Minister Boris Johnson has the power to deliver Brexit on January 31, ending three years of political uncertainty.

However, the election euphoria that has helped boost many UK stocks and seen sterling make strides against the dollar and the euro is showing signs of waning, with investors once again fearing the prospect of a no-deal Brexit.

‘If political uncertainty does increase in the UK, both business and consumer confidence can be expected to be impacted,’ Senior Currency Strategist at Rabobank Jane Foley told Reuters.

‘Consequently, the market is likely to conclude that the probability of a dovish Bank of England in 2020 will also increase,’ Foley said.

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