GBP/EUR rates dropped sharply yesterday afternoon, with the Pound falling back below 1.13.
Once again it seems as though last week’s positive spike was yet another false dawn, with investors risk appetite for the Pound seemingly evaporating.
The Pound came under pressure following a report that the first EU Brexit draft released UK government, has not been received well by the EU or their chief negotiator Michel Barnier.
The Irish border issue remains one of the key sticking points and the reality is that until this is agreed, there will be no transitional period and no soft Brexit.
This has caused investors to panic and pull their funds away from Sterling, which has once again taken two steps back, having been fairly well supported prior to this.
Yesterday’s dropped was a continuation of recent trends, with the Pound seemingly hitting a brick wall once again. Investor confidence in the UK economy and ultimately the Pound is being driven by sentiments around Brexit and the current hiatus and continuous uncertainty, is handicapping any major advances for the Pound.
Despite last week’s upturn if we scratch below the surface all is not well behind the scenes. Reports of a splintered Tory government are not new but seem to be gathering momentum on almost a daily basis now. UK Prime Minister Theresa May was very bullish in her recent public address and her behind closed door meeting with senior Conservative MP’s last week was also meant to be a success.
However, this seems now not to be the case following a report in the Times earlier this week, which indicated three separate cabinet ministers warned May that the current government could collapse this year. Tory rebels could look to back Labours plans for full membership of the customs union, once the UK finally separates itself from the single bloc.
This goes against the PM’s current stance and as such, investors may not react positively to her speech on Friday even if she remains bullish about the UK’s current Brexit position.
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