Over the course of the trading week, the pound has lost ground against all major currencies, with GBPEUR dropping below 1.10, 1.30 on GBPUSD and below 1.80 for GBPAUD as an interbank exchange rate.
It does appear that the main reason behind this sterling weakness is the comments made by Prime Minister Boris Johnson on the weekend which were effectively drawing a line in the sand for when he expects an agreement on a trade deal between the U.K and the EU.
The magic date this time around is October 15th and he has warned that should an agreement not be in place by this date then he will be happy to walk away from the talks, ultimately ending in a ‘no deal brexit’.
Adding fuel to the fire is the internal market bill released by the U.K , which may essentially lead to overriding some of the initial agreements in the withdrawal bill and has ruffled many feathers within the EU.
Because of this, the EU are holding emergency talks regarding the implications of this potential breach and how they will respond to it, it certainly has left a bitter taste in the mouth of many senior EU officials and won’t do a lot for relations at such a critical stage.
David Frost and Michel Barnier are meeting again today in London for crunch trade talks and expectations are for some news either later today or tomorrow on how the latest round of talks has gone.
A negative tone (which has been quite common) from both sides may lead to further woes for Sterling exchange rates, however even the hint of progress may reverse the trend and give the pound a good finish to the trading week.
We could see these talks continue close to the deadline date, as that seems to be how these matters always pan out. Sterling may struggle as the clock continues to tick and no Brexit deal is in place, mainly due to the heightened chance of a no deal Brexit which has historically led to weakness for the GBPEUR rate.
The issue for those waiting to buy foreign currency in the coming weeks is that although the pound may gain ground off the back of a Brexit trade deal it may only regain what may be lost in the next few weeks due to investors still being concerned and keeping the pound at arm’s length.
Ever since the referendum a no deal Brexit has caused analysts to make sweeping predictions about Sterling weakness and has caused the pound often to lose value. Many had suggested a drop below parity for GBPEUR and a significant drop in GBPUSD so this subject is extremely important for those with a pending trade to carry out.
We have limited economic data out for the rest of the trading week, but today does see the ECB interest rate decision and press conference so anyone looking to buy or sell euros may wish to keep a keen eye on euro exchange rates from 12:24pm onwards today.
If you are in the position where you may need to carry out an exchange over the course of this week or in the weeks and months to come then there is no doubt we are likely to have a volatile trading period coming up.
Should you wish to have an expert by your side to help keep you up to date with the very latest market movements, which can make a huge difference on any currency transfer then feel free to contact me here by filling in the form below and I will be happy to get in touch personally.