Sterling has slipped ahead of a fresh round of EU-UK trade negotiations and as warnings from both sides cast doubt over a Brexit deal.
Over the weekend Boris Johnson threatened to abandon trade talks if they couldn’t come to an agreement by mid-October. Furthermore, the Financial Times reported that the UK government were looking at ways to override parts of the Brexit Withdrawal Agreement which undoubtedly would not sit well with officials in Brussels. Reports this morning that the UK Government legal dept head (Jonathan Jones) has quit over Johnson’s plan to challenge parts of the withdrawal agreement has only added to these concerns as it increases the odds of a no-deal departure.
Comments from Germany’s finance minister (Scholz) corroborates these feelings. He said the latest signals from London do not raise hopes for a Brexit agreement and that a disorderly Brexit would be a ‘disaster for the UK. This could all be part of the negotiation strategies but the Pound has weakened nonetheless.
As a result, GBP/USD has fallen around 1% since the start of this week and now trades at a 2-week low. The GBP/EUR also trades at a 2-week low, after losing a cent since yesterday morning. Traders will be closely watching how this latest round of Brexit negotiations goes and to see if anything does develop with the reports of rowing back the withdrawal agreement. Looking ahead, investors will also be interested to hear the latest thoughts from the European Central Bank at their next interest rate meeting on Thursday.