Sterling hit its lowest point against the US dollar since mid-January on Friday after the EU's chief Brexit negotiator, Michel Barnier, said a transition deal is not yet guaranteed. Barnier said that "substantial" disagreements, including the status of newly arrived EU citizens after March 2019, the UK's say in EU laws, and justice and home affairs issues. British business groups have uniformly called for a transitional deal to be agreed as soon as possible, with fears that cross-border trade could grind to a halt between the UK and the EU after March 2019 if no agreement is reached. The move lower for sterling underlines that the biggest single risk facing the UK economy remains the Brexit process.
The UK's trade deficit, widened again in the three months to December 2017 as exports to the EU shrank. Total UK trade deficit, including goods and services, widened by £3.8bn to £10.8bn according to statistics from the Office for National Statistics . The UK has generally run a surplus in trade of services, as it exports more in services than it imports. Yet this surplus narrowed by £0.5bn in the three months to December.
The Dollar rose on Friday after a brief U.S. government shutdown ended after Congress passed and signed into law a wide-ranging deal that is expected to push budget deficits into the $1 trillion-a-year zone. Trump’s signature brought an end to a partial government shutdown - or closure of federal agencies - that had been triggered in the early hours of Friday as Congress was still debating the budget deal. It also extends the U.S. government’s borrowing authority until March 2019, sparing Washington politicians difficult votes on debt and deficits until after mid-term congressional elections in November.