Sterling falls as Brexit talks stall
Sterling fell against both US Dollar and Euro on Thursday as Brexit talks stall between the U.K. and the EU. Both parties are far apart on the key issue of state aid and the U.K. was dealt with another blow as the EU launch a legal case against the U.K.
The EU gave the U.K. until Wednesday to remove sections of the Internal Market Bill which overrides parts of the withdrawal agreement but the U.K. failed to do so. The EU have now begun legal proceedings against the U.K. with European Commission President Ursula Von Der Leyen saying the UK would have until the end of November to respond to the EU’s concerns over the draft legislation.
So far UK and EU officials have failed to close the gap on state aid rules, an issue which is preventing them from reaching an agreement on post-Brexit trading rules. The pound did start the day higher benefiting from a weaker dollar but then fell shortly after on the news that the EU and UK were still far apart on trade talks.
The dollar fell on Thursday against a basket of major currencies as differences remain on the size of the stimulus package to help support the US economy. Congressional Democrats have proposed a $2.2 trillion package to respond to a pandemic, while Republicans have suggested a $1.6 trillion response.
Furthermore US jobs data had minimal impact on the dollar, data showed U.S. initial jobless claims fell last week but remained at recession levels, while personal income dropped in August. Also U.S. construction spending increased more than expected in August as historically low interest rates boosted home-building, but manufacturing activity unexpectedly slowed in September.
1:30 – USD – Average hourly earnings m/m – Forecast at 0.5% from previous 0.4%
1:30 – USD – Non-farm employment change – Forecast at 900k from previous 1.3m
1:30 – USD – Unemployment rate – Forecast at 8.2% from previous 8.4%
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