The Bank of England (BoE) seemed more upbeat yesterday over the outlook for monetary policy, but the pound was having none of it and continued to weaken.
The pound is fluctuating this morning. While GBP/EUR is flat at €1.1343, GBP/USD has slipped marginally lower to US$1.3377. GBP/AUD has climbed 0.4% to A$1.7770, GBP/NZD is up 0.6% to NZ$1.9563, and GBP/CAD has risen 0.2% to C$1.7151.
The EU have now given the UK 48 hours to resolve the current issues blocking negotiations. Given what happened yesterday, that seems a stretch.
Read on to see just where the UK currently stands…
What’s been happening?
The issue of what will happen to the Irish border after Brexit continued to weigh on the pound yesterday.
Additionally, the Cabinet’s rift over the split from the EU widened further, with Theresa May denying claims from Chancellor Philip Hammond that the UK would pay the €50 billion divorce bill without any guarantees on trade.
Meanwhile, Brexiters are accusing the Prime Minister of trying to use the Irish border debate to force through a soft Brexit, with Jacob Rees-Mogg yesterday suggesting in Parliament that May’s red lines needed another ‘coat of paint’ as they were beginning to ‘look a bit pink’.
On top of this, markets were further disheartened when David Davis, the UK’s Brexit secretary, gave a confusing admission that there were no individual impact assessments into the result of Brexit upon different sectors of the UK economy.
Davies had claimed a few weeks ago that there were nearly 60 such documents that went into ‘excruciating detail’, so markets were left confused as to whether or not the UK government has actually prepared for the impact of Brexit.
After some early losses, GBP/EUR was able to end the day marginally higher thanks to disappointing Eurozone data and the strength of the US dollar.
Markets ignored positive comments from European Central Bank (ECB) official Yves Mersch, who claimed the Bank should fix an end date for the quantitative easing programme rather than leaving it open-ended.
GBP/USD ended the day having recovered most of its losses since the morning, although still lower overall.
The US dollar was boosted by a solid reading from the latest ADP employment report, which suggests that the labour market remains on a firm footing.
What’s coming up?
The clock is ticking for the UK government to come up with a solution to the Irish border and citizens’ rights post-Brexit, which is sure to weigh on the pound today.
ECB President Mario Draghi will be chairing a conference today, so there may be some comments from him on monetary policy that caused jitters for the euro.
US jobless claims figures are set for release today, which could cause some movement for USD.
Joining the corporate trading desk in 2007, Phil now overseas all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FSA approval and has completed the Certificate in International Treasury Management (CertiTM)