Sterling had benefited off the back of euro weakness earlier in the week following the announcement of Italian Prime Minister Conte’s resignation.

Some positive comments from German Chancellor Angela Merkel regarding her openness to making slight adjustments to the Irish backstop had also benefited the pound. Neither of the two positive moves for sterling gave it enough impetus to move above its current trading ranges through and by yesterday afternoon sterling was once again in the red as markets were awaiting news from the meeting between Boris Johnson and Angela Merkel’s meeting in Berlin.

Rumours suggested that Johnson would make it clear that unless the Brexit deal is amended, Britain will be leaving the EU on the 31st of October without a deal in place. It’s Boris Johnson’s no-deal rhetoric that has rattled currency markets, leaving the pound trading as low as the early 1.06’s vs the euro and the early 1.20’s against the US dollar at its lowest interbank exchange levels. Both of which have taken place within the last fortnight.

The main update from last night’s meeting is that Merkel has challenged Britain to come up with an alternative to the current Irish backstop arrangement in the next 30 days. Interestingly there are mixed signals from EU leaders, as an hour after Merkel spoke last night French President Macron said there will be no renegotiations. Johnson is set to meet Macron in Paris later today so it’s worth keeping an eye out for any further updates that could impact the pound.

UK House of Commons, EU Parliament must pass deal

Mixed news for the UK economy behind Sterling’s lack of direction?

Yesterday a mix of news was released out of the UK in the lead up to the key meeting in Berlin. In the morning it was announced that UK public finances are weaker than expected, as Britain posted a smaller budget surplus than hoped in July. This decline was most likely caused by government spending rising faster than government income and it could result in it becoming harder for PM Johnson to make the tax cuts he has outlined.

It was also announced that due to the weaker pound, UK investment from the likes of China and the US has swelled this year. In the first 7-months of 2019 there was more investment in the UK’s Fintech sector than in the entirety of 2018. This is a positive for an important area of the UK economy that could be reflected in the pound in the longer term.

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