Sterling fell against both EUR and USD during Monday trade as concerns over Prime Minister Boris Johnson’s hard line stance on Brexit continues to take its toll on GBP.
Sterling weakened to its lowest level for 3 weeks, dropping as low as 1.2912 against USD and 1.1652 against EUR.
Much of sterling’s weakness has been attributed to the heightened threat of a no-deal Brexit following Boris Johnson’s push to ‘get Brexit done at all costs’. For instance, on Friday the UK government approved the Prime Minister's EU Withdrawal Bill in an overwhelming fashion with a reading of 358-234.
The withdrawal agreement means the UK will leave the EU on 31st January 2020 and will enter a transitional period until the end of December 2020. One of the key provisions of Johnson's Withdrawal Bill which has dented hopes of a sustained recovery in sterling is the provision preventing an extension of the current transitional period ending on 31st December 2020. Investors have interpreted this provision of the bill as GBP negative as a 11 month window to agree a trade deal with the EU is currently considered as unrealistic.