The US dollar fell sharply on Monday as risk-on trade and falling US Treasury yields weighed heavily on the safe-haven currency.
This initially saw Sterling soar through the first half of the week after reports emerged suggesting that UK-EU trade talks had entered the so-called ‘tunnel’ phase of intensive negotiations.
But this quickly gave way to some considerable selling pressure through mid-week as these reports proved to be mistaken, after the EU’s chief Brexit negotiator, Michel Barnier, told EU officials that talks remained stuck on three keys issues and that a deal ‘hangs in the balance’.
Despite a lack of positive headlines, a sense of Brexit optimism then began to propel GBP exchange rates higher again in the latter half of the week.
However, this rally again proved short-lived, with the pound stumbling after the UK accused the EU of hardening its negotiating stance, with a UK source suggesting the chances of a deal were ‘receding’.
Turning to this week, it seems safe to assume that Sterling will continue to experience volatility as UK-EU trade talks enter what looks to be a final tense week.
At the time of writing, ‘significant differences’ remain between the two sides, and a UK official was quoted as saying the chances of a deal are about 50-50 ahead of a meeting between Boris Johnson and European Commission President Ursula von der Leyen later this week.
If talks ultimately fail, we can expect the pound to plummet.
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)