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Pound retreats from three-week high as EU warns of post-Brexit barriers

currency-newsPound retreats from three-week high as EU warns of post-Brexit barriers
The pound fell back from a three-week high yesterday as the currency’s post stimulus gains were punctured by fresh Brexit jitters.

Meanwhile, trade in Sterling is subdued this morning, with GBP/EUR flat at €1.1164 and GBP/USD slumping to $1.2571. GBP/CAD is rangebound at C$1.7131, while GBP/AUD and GBP/NZD hold steady at AU$1.8145 and NZ$1.9189 respectively.

Coming up, a sparse data calendar is likely to see coronavirus developments begin to drive market sentiment again today.

What’s been happening?

The pound spent most of Thursday’s trading session on the front foot, with Sterling maintaining its bullish trajectory in light of the UK’s new £30bn stimulus package, despite some concerns about its effectiveness.

However, the pound fumbled these gains towards the end of the European session after the latest round of Brexit talks concluded, with EU chief negotiator Michel Barnier suggesting that ‘significant divergences’ remained between the two sides.

GBP investors were particularly concerned by a document published by Barnier, which warned UK firms should expect barriers when selling products in the EU after Brexit.

The euro, meanwhile, was left rangebound through yesterday’s session as Germany’s latest trade figures showed a widening of the country’s trade surplus in May but imports and exports fell short of expectations.

Finally, we saw the US dollar find its footing on Thursday following a sharp selloff on Wednesday, with investors returning to the safe-haven currency following the news that the US would be barring companies working with Chinese tech companies from government contracts.

What’s coming up?

Turning to the end of this week’s session, a lull in notable releases could see coronavirus developments begin to drive markets again.

This may result in a rally in the US dollar if second wave fears begin to undermine market confidence once more.

For GBP investors the focus is likely to remain on Brexit, with the pound potentially stumbling as uncertainty over post-Brexit barriers between the UK and EU drags on Sterling sentiment.

In the absence of any notable data, it is likely the euro will be left adrift through the end of the session, with EUR investors looking forward to next week’s key EU summit of leaders.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees 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 FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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