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Pound struggles as UK government sticks to its guns on Brexit deadline

Philip McHugh April 17th 2020 - 2 minute read

The pound stumbled on Thursday as the UK government reiterated its desire to exit the Brexit transition period by the end of 2020.

Sterling remains rangebound so far this morning, with GBP/EUR flat at €1.1510 and GBP/USD subdued at $1.2476. GBP/CAD has stalled at C$1.7543, while GBP/AUD and GBP/NZD hold steady at AU$1.9643 and NZ$2.0778 respectively.

 

Looking ahead, its likely we will see investors remain preoccupied by coronavirus developments today, potentially infusing further volatility into the currency market.

What’s been happening?

The pound was on the back foot yesterday as a Downing Street spokesperson said that the UK will not seek any extension to the Brexit transition period.

This came shortly after the head of the IMF, Kristalina Georgieva, called on the UK and EU not to add to the ‘unprecedented uncertainty’ arising from the coronavirus crisis by refusing a delay to Brexit if needed.

The euro also struggled to find support on Thursday amid concerns that EU countries were failing to coordinate their strategies for lifting their coronavirus lockdowns.

So far most countries appear to be acting on their own, largely ignoring the guidelines published by the European Commission and reigniting fears about the cracks in EU unity which have come about due to the coronavirus crisis

Meanwhile, the US dollar’s rally ran out of steam yesterday following the publication of the latest US initial jobless claims.

Thursday’s figures showed that unemployment claims rose by another 5 million last week, bringing the total rise in claims since the start of the coronavirus crisis to over 20 million, with USD investors fearing not all of these jobs will exist once the outbreak is under control.

What’s coming up?

As the week comes to a close the coronavirus crisis will continue dominating headlines and dictating market sentiment.

The US dollar will be best positioned to take advantage of this, with demand for the safe-haven currency likely to strengthen again so long as markets remain jittery over the prospect of a sharp global recession this year.

For GBP investors the focus will be on Boris Johnson’s recovery, as they express their concerns about a leadership void whilst the Prime Minister remains at Chequers recuperating from his time in intensive care.

The only data of note today will be the Eurozone’s latest CPI figures, with the euro potentially struggling as March’s final figures are expected to confirm inflation slowed to a five-month low.

Written by
Philip McHugh

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