The pound has struggled to make any significant inroads against the major currencies, despite a slight upturn against EUR earlier this week.
Investors’ risk appetite for the pound has diminished once again, following a lack of clarity over which direction Brexit talks are really heading in.
The pound had made gains on the assumption that there would be an agreement between the UK and EU at last week’s summit in Brussels. This positivity proved to be premature as talks once again hit an impasse, predominantly due to the issues surrounding the Irish border.
Conflicting reports are not helping to clarify this situation, which is proving to be a key sticking point in the Brexit negotiations. Discussions about a backstop agreement – which could involve the whole of the UK following next March’s deadline – seem to have helped quell any further major GBP sell-offs for the time being.
However, in truth no one yet knows how this situation will play out. UK Prime Minister Theresa May is struggling to appease not only the UK public, but also members of her own party. With this lack of continuity unlikely to boost investor confidence in the pound, I am not anticipating any aggressive spikes over the coming days, unless of course there is a breakthrough in Brexit negotiations.
GBP/EUR rates are currently marooned around 1.13, with the single currency finding plenty of support around the current levels. This support for the euro comes despite the market’s concerns surrounding the Italian economy and the changing political landscape in Germany.
The current trend is typical of recent months, when sterling has threatened to make a sustained advance, only to see its value fall amid the on-going Brexit uncertainty.
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