Barnier comments prompt fresh Brexit volatility for pound
[vc_row][vc_column][vc_column_text]Comments from chief EU negotiator Michel Barnier prompted the pound to surge higher across the board last week, with investors betting on the odds of a softer form of Brexit.
This relief proved short-lived, however, as Barnier later clarified that the EU’s red lines have not changed and that the prospect of a no-deal Brexit remains.
A surprise weakening in the Eurozone consumer price index left the euro on a weaker footing, meanwhile, as the odds of any imminent shift in the outlook of the European Central Bank (ECB) faded.
The announcement of a new trade deal between the US and Mexico prompted a temporary easing in market trade worries, even though tensions with China remain heightened.
Pound exchange rates volatile as Brexit sentiment shifts
After Michel Barnier struck what sounded like a more optimistic note on Brexit the mood towards the pound improved, in spite of the significant hurdles that still stand in the way of a deal.
Key issues such as the Irish border and the jurisdiction of the European Court of Justice continue to hamper progress towards a satisfactory Brexit deal, with the two sides remaining largely at odds.
As the push back against Theresa May’s Chequers proposals continued this swiftly eroded the pound’s latest bout of confidence, leaving GBP exchange rates on a weaker footing once again.
Demand for the pound diminished further on Monday morning as the UK manufacturing PMI for August disappointed, falling from 54.0 to 52.8 to hit a 25-month low.
This naturally raised concerns over the outlook of the UK economy in the third quarter, giving investors fresh incentive to pile out of GBP.
If the corresponding construction and services PMIs also point towards a weakening in domestic growth this could keep the pound on the back foot over the course of the week.
On the other hand, a solid showing from the service sector may be enough to give GBP exchange rates a rallying point on Wednesday. Currently, economists expect to see a marked improvement.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]
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* Information courtesy of Currencies Direct, Philip McHugh
The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information. This article was written by Currencies Direct.
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