The time scale for a deal on Brexit does not make good reading. Parliament is not due to reconvene from recess until early September which will leave just under eight weeks for Boris Johnson to get a deal in place. This is something Theresa May couldn’t do in over two and a half years.
Boris has threatened to leave the EU with no deal in place and has said he is not willing to negotiate with Brussels unless they’re willing to drop the Irish back stop. This is something Brussels have stated on numerous occasions they are not willing to do. The situation has not been taken well by investors and sterling has fallen in value as a result.
There is also the possibility of a general election which may not do the pound any favours. If we look at the 2010 general election for example, we saw sterling lose value due to the political uncertainty.
GBP/EUR is now sitting at close to a two-year low and has been on a steady decline for some time. 5th May saw GBP/EUR interbank rates at 1.1751, we saw the market hit the 1.07s during yesterday’s trading.
The higher probability of a no deal the weaker you could expect the pound to become. Without clarity on Brexit investors could be finding it hard to justify a significant rally for sterling.
Today we will see the release of unemployment and average earnings. Average earnings are set to see an increase from 3.6% to 3.8% and unemployment is set to remain unchanged at 3.8%. I would not expect this to cause any great shakes on the market unless the data lands away from expectations. Brexit continues to be the key driver on sterling value.
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