Pound stumbles as Brexit jitters return

Philip McHugh May 18th 2020 - 2 minute read

The pound nosedived on Friday, undermined by fresh Brexit jitters as the latest round of trade talks between the UK and EU ended in a stalemate.

Sterling is still struggling this morning, with GBP/EUR trading at €1.1192 and GBP/USD retreating to $1.2108. GBP/CAD has slipped to C$1.7038, while GBP/AUD and GBP/NZD have fallen to AU$1.8791 and NZ$2.0316 respectively.

This week the focus will be on the Eurozone’s latest PMI figures. Will the easing of lockdown measures have triggered a notable rebound in economic activity?

What’s been happening?

 
The pound closed last week’s session on a low, plummeting to its worst levels in six weeks as it was battered by renewed Brexit uncertainty.

This followed the conclusion of the latest round of Brexit trade talks, with the UK's chief Brexit negotiator David Frost reporting that ‘very little progress’ had been made.

This was echoed by his EU counterpart Michel Barnier, who said he is ‘not optimistic on chances for a deal with the UK’ and that the EU will be ‘stepping up preparations’ for a no-deal Brexit.

The US dollar also retreated on Friday, relinquishing some of its gains from earlier in the week as US retail sales were revealed to have plummeted to a new all-time low in April.

Also denting the US dollar was an uptick in market optimism following reports that trials of a coronavirus vaccine on six rhesus macaque monkeys had yielded positive results.

Meanwhile, the euro ended last week on the front foot as news of a new €250bn safety-net for EU workers offset news that Germany had fallen into a recession.

What’s coming up?

 
Looking to the week ahead, the spotlight will be shining on the Eurozone’s latest PMI figures, with investors eager to see if the easing of European lockdown measures helped spur a recovery in economic activity.

In the meantime, the euro could find some support from the latest ZEW surveys on expectations that sentiment improved this month as economies started to reopen.

In the UK a wealth of data is likely to take its toll on the pound this week as it highlights the damage inflicted by the coronavirus crisis on the UK economy.

Finally, we may see the US dollar mount a comeback if tensions between the US and China dampen market sentiment.
 

Written by
Philip McHugh

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