25/08/2020

Sterling stalls on a quiet day


GBP

Sterling moved lower against both the euro and dollar yesterday on a day absent of any major market moving data.

Monday’s low move appears to be an extension of Friday’s decline which saw the pound fall 1% against both the euro and dollar. This move has been caused by dampened investor appetite for the pound following the latest round of Brexit trade talks. Both UK and EU counterparts have blamed each other for the current stalemate in talks. Speaking on Friday, European chief Brexit negotiator Michel Barnier blamed the UK for ‘failing to show any real willingness to move forward on issues of fundamental importance to the European Union’. Despite Barnier’s downbeat assessment of talks, UK chief negotiator David Frost struck a more optimistic tone stating that a deal remains ‘possible’ but acknowledged time is ‘short for both sides’.

With the clock ticking down towards the transition deadline in December and the European Union’s internal deadline at the end of October, investors are keeping a close eye on talks with the market likely to overreact to any Brexit related news flow. There is optimism amongst investors that a deal will be struck in the eleventh hour as most EU talks go to the wire. However, should talks continue failing to yield any progress, it’s likely sterling will remain pressured heading into year-end.

Key announcements

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