We have seen the pound bounce back from the lows seen early last week against all the major currencies. A series of better than expected UK data releases last week and talks of a cross party government replacing the current government amidst a no confidence vote in Boris Johnson and his government helped restore some value back to the pound on the hope a Brexit no-deal can be averted.
However, Prime Minister Boris Johnson is still in the driving seat and his bias still seems to be pointing towards a Brexit no-deal rather than renegotiate a deal with the EU. With Brexit Secretary, Stephen Barclay now having signed the “commencement order”, this could indicate that the UK is one step closer to leaving the EU.
Yesterday, the pound remained relatively stable potentially indicating that the market has factored in the current views on Brexit and the odds of a Brexit no-deal. However, any further news supporting a Brexit no-deal could turn the pound back in a downward direction.
While we are seeing the pound at slightly better levels, any clients with a position to buy or sell the pound against any other currency, may wish to discuss their position with their account manager at FCD.
Boris Johnson is meeting German Chancellor Angela Merkel on Wednesday, and French President Emmanuel Macron on Thursday. Ahead of these meetings, Boris Johnson this morning wrote to Donald Tusk, the President of the European Council, to list his demands required for a Brexit deal including the removal of the Irish backstop.
The EU have maintained that there will be no change to the current Brexit deal, and a spokeswoman for the European Commission recently said that the UK will be the biggest loser if the UK were to leave the EU without a deal. With this in mind, the meetings on Wednesday and Thursday are unlikely to see any changes other than to confirm the current path leading towards a Brexit no-deal.
The Confederation of British Industry (CBI) Industrial Trends Order for August are released later today with a forecast of -25 against a previous reading of -34. This is a leading indicator of business conditions, and the negative figures show expectations for order volumes in the UK to continue to fall that could potentially cause movement for the pound.
With light UK data releases for the rest of the week, and the 31st October deadline getting closer the pound is likely to remain vulnerable in the coming weeks.
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