Sterling’s positive run came to an abrupt end yesterday following unscheduled Brexit talks in Brussels.
The UK’s chief negotiator Dominic Raab held emergency talks with his EU counterpart Michel Barnier over the weekend, hoping to resolve some of the key issues which have halted any deal being announced. These included an agreement over a backstop for the Irish border, should a final resolution not be reached by the impending deadline.
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Despite multiple reports on Saturday that a deal was imminent, once again talk of an agreement seems to have been premature.
The pound saw its value dip against all the major currencies, having made impressive gains throughout last week.
GBP/EUR rates had been trading close to a three-month high but fell to a low of 1.1306 yesterday. Sterling also took a hit against the USD, falling by over a cent to below 1.31. It did fair better against the commodity based currencies but failed to make any further inroads against the CAD, AUD & NZD, having gained almost four cents on the former in the past month.
Whilst a final deal is yet to be agreed it would seem both sides are keen to thrash out a proposal, and there is still hope that one could even be reached by the start of the EU summit on Wednesday. The Irish border seems to be the last remaining obstacle and all eyes will be fixed firmly on Brussels over the coming days, to see whether this long running saga can finally reach a positive conclusion.
Whilst talks between the UK and EU are on-going, news over the weekend indicated PM Theresa May is under increasing pressure and could face a vote of no confidence, should she fail convince Parliament to push through her Brexit proposal.
Whilst the PM has been at loggerheads with the EU for months over the finer details of any prospective deal, she has had similar problems trying to convince senior minsters that her Brexit plan is the right one for the UK.
Former Brexit secretary David Davis wrote an article for the Sunday Times, urging minsters to “exert their collective authority” and reject the plans at a Cabinet meeting on Tuesday.
These calls were vigorously disputed by Foreign Secretary Jeremy Hunt, who claimed that the PM was negotiating the best deal possible for the UK and such “calls” were not welcome, when the PM was trying to overcome the remaining obstacles in trying to secure an agreement with the EU.
It seems as though these conflicting reports have caused investors to shy away from the pound, which has once again seen its value diminish as the result of the on-going uncertainty.
This uncertainty and the prospect of a no-deal scenario has proved to be a huge weight on sterling’s shoulders over recent months and is one of the main reasons it had struggled to make any sustainable inroads against the other major currencies.
Turning our attentions away from any prospective Brexit deal, there are some key economic data releases for the UK, which could impact sterling’s value this week.
After a quite start to the week, tomorrow brings about a host of employment data, including the official Unemployment Rate. This is predicted to remain unchanged at 4%, so expect this figure to be priced into sterling’s value today to some extent.
Wednesday sees the release of some key inflation numbers, whilst on Thursday we have the latest set of UK Retail Sales figures.
Any client with a Sterling currency exchange to execute should be keeping a close eye on all of the aforementioned data releases.
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