GBP discovers new lows

July 7, 2016

The US Dollar remains stable near weekly peaks against other majors as the fresh wave of anxiety regarding Brexitafter-effects urged investors to pull out their money from risky assets and run into safe havens.

GBP/USD fell by 0.60% to 1,2941 trading near the new 31-year low at 1,2797 which it has touched on Tuesday.

The selloff renewed with new intensity around the GBP after the Bank of England released a financial stability report which showed that the risks for UK economy are starting to “crystallize”. As a counter measure, the bank has cut CCyB rate for the UK banks, thus rising their ability to lend more to the households. The BoE head Mark Carney said that lowered margin requirements for banks imply “considerable changes” which will help Britain to get over the negative impact of breaking ties with the EU.

After the release of the financial stability report, where it was said that the negative Brexit consequences have started to take effects, the GBP tumbled to the 1.28 level while banking sector shares sunk by 20%.

Last week, the BoE head signalled that more stimulus is needed to support the UK economy, expecting a cut in interest rates and extension of the easing program.

Industrial data from the EU disappointed investors after the report on the German Manufacturing orders showed no changes, missing growth expectations by 1%. April readings showed a 1.9% decline, as it was corrected to a 2% drop from 0.1% growth.

EUR/USD declined by 0.20% to 1,1050 while EUR/GBP rose by 0.4% to the 0.8540 level. USD/JPY lost 1.2%, declining to 100.53, while CHF declined by 0.29% against the US Dollar to 0.9790.

The US Dollar index, which tracks the value of the greenback against the basket of other six majors is nearly flat, trading at 96.20, after climbing to the weekly peak of 96.55.

Traders will assess the minutes from the last FOMC meeting, which will probably give hints on future monetary policy of the United States.

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