The British pound exchange rate collapsed on Tuesday October 8 and fell below 1.22 USD. This means that the GBP/USD exchange rate was at its lowest level in a month due to increased fears that we will witness a no-deal brexit at the and of October.
Yesterday's press release from BBC and Sky reporters reports pointed to an imminent breakdown in brexit talks. Prime Minister Boris Johnson in an call with German Chancellor Angela Merkel said that an agreement on Brexit is impossible if the European Union wants Northern Ireland to remain in the customs union. What's more, news has emerged that the British government is preparing to break the negotiations because progress has been limited in recent days.
The United Kingdom has presented a tariff schedule which shows that up to 88 percent of total imports would be free of charge after no-deal brexit. This would apply for a period of 12 months. Import duties related to the transport of goods by trucks will be reduced to 10 percent from 22 percent after previous warnings about the potential impact on domestic industry. Tariffs are likely to cause some increase in consumer prices, which will affect products currently covered by EU agreements, including new import duties on clothes - according to Bloomberg news agency.
There has also been speculation that Prime Minister Boris Johnson is preparing to break down talks and is ready to blame Ireland and the EU. We would like to point it out that the date of the once postponed brexit is the end of October. There are indications that investors in the British pound market must be on guard by then and volatility in this market may be increased. Any news about the positive brexit result may support GBP, and any negative, weaken it. After yesterday's decline, today on October 9 in the morning the GBP/USD exchange rate fluctuates around 1.2200, and investors are waiting for further developments.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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