Sterling fell to a three week low against the US Dollar before Christmas due to concerns over a possible hard Brexit. The pound fell to a low of 1.2905 against the dollar, down 0.6% on the day and also it was 0.6% lower against the Euro hitting its lowest level in over three weeks. The post-election optimism has begun to evaporate with growing anxiety around a possible hard and chaotic Brexit in 2020, and this has seen the pound reverse recent gains.
The UK’s withdrawal from the EU remains a driving force for the pound, with Mr Johnson continuing to use the threat of a no-deal Brexit as a bargaining tool in the upcoming trade talks. The pound is likely to remain at current levels until Parliament is back from Christmas recess.
The dollar remained steady after Beijing announced that it is lowering tariffs on more than 850 imports, making it cheaper for Chinese firms to buy products from abroad. According to China’s finance ministry, the sudden move aims to “increase imports of products facing a relative domestic shortage, or foreign speciality goods for everyday consumption.” This has fueled speculation that the US might follow suit, enabling both sides to agree on a phase one trade deal as soon as next month.