Brexit uncertainty weighs on Sterling
Sterling projections took a hit yesterday after the European Union’s chief of Brexit negotiator said that the UK had shown no willingness to find a compromise in reaching a trade agreement. Barnier’s comments ensured that the pound slumped as investor concerns mount on the likelihood of a deal being reached before the December deadline.
It is likely that this is political brinkmanship which will continue over the next few months, but such political games will lead onto an increase in sterling volatility levels. Overnight implied volatility measures have shot up, showing that traders are increasingly nervous about Brexit headlines and no-deal probability, especially on what was the last day of summer negotiations.
However, this morning has given the pound respite as UK retail sales beat expectations in June, coming in at 13.9%. The figure was expected to be 8% but we’ve seen upbeat consumption due to a relaxation in lockdown measures. The furlough scheme has also meant that incomes have remained steady which has fuelled this retail bump.
09:30 – GBP – Markit Services PMI (Jul); expected to increase to 51.1 from previous 47.1
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