09/09/2020

Sterling lower as Brexit deal takes its toll


GBP

Sterling finished the day lower against both the euro and dollar on Tuesday as uncertainty over a UK-EU trade deal took its toll on the pound.

According to a recent report published by the Financial Times, the UK are to present a new piece of legislation to parliament on Wednesday which would see parts of the EU Withdrawal Agreement superseded by domestic law. In particular, the government want to protect the Northern Ireland’s place within the UK market and are looking to override the withdrawal agreement requirements for customs checks between Northern Ireland and the remainder of the UK.

The intended legislation has caused a storm amongst EU officials who have threatened the UK against breaking international law. Current European Commission Chief Ursula Von Der Leyen fired her own warning to the UK stating that there will be no trade deal should the UK attempt to overrule parts of the withdrawal agreement.

In addition to this, sterling was further hampered by news the government’s top legal adviser Jonathan Jones resigned as he is said to be “very unhappy” about the government’s intention to overwrite parts of the withdrawal agreement.

The latest news is of huge concern to investors relying on a UK-EU trade deal. It’s clear from the current state of negotiations that huge differences remain between both sides with such little time to agree a deal.

Prime Minister Boris Johnson has already told the EU that a free trade deal must be struck by the 15th of October otherwise the UK “will move on”. With the current talks being the second from last before Johnson’s October deadline, the pressure is on both sides to try and yield progress. As things stand, progress seems a million miles away which if it continues to be the case this will likely keep sterling pressured heading into October.

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