Brexit jitters weigh on sterling


Sterling dropped on Monday as Brexit talks stalled and threatened to plunge into crisis mode after Britain allegedly threatened to override its European Union divorce deal. Reports come out that the UK is planning new legislation that will override key parts of the Brexit withdrawal agreement, particularly significant news as this could threaten the January treaty and cause difficulty on the Irish border.

With just a few weeks until the self-imposed deadline for a post-Brexit trade deal, these headlines are leading traders to sell the pound off as no-deal fears are starting to mount. With concessions that are still yet to be made, further issues leave investors in serious doubt about the ability to achieve a deal.

With these kinds of headlines, market volatility will undoubtedly rise. Implied volatility for all maturities spiked, with contracts incorporating the end of the transition period hitting their highest level since July. One month measures also shot up to their highest cost since June.

Key announcements

10:00 – EUR- Gross Domestic Product (QoQ) (Q2); expected to remain at -12.1%
10:00 – EUR- Gross Domestic Product (YoY) (Q2); expected to remain at -15%

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