[vc_row][vc_column][vc_column_text]A sharp increase in the odds of the Brexit transition period ending without a fresh UK-EU trade deal saw the pound fall sharply out of favour last week.

While Eurozone economic confidence saw a surprise improvement in February this was not enough to keep the euro on a stronger footing for long.

Support for the US dollar, meanwhile, weakened in the wake of the Federal Reserve’s decision to initiate an emergency interest rate cut on Tuesday.

Increasing global anxiety over the spread of Covid-19 and its likely impact on economic growth continued to weigh on the risk-sensitive Australian and New Zealand dollars, on the other hand.

UK’s willingness to walk away from trade talks fuels pound losses

After the UK government indicated a willingness to walk away from talks with the EU in June if sufficient progress has not been made the appeal of the pound weakened significantly.

Investors hurried to price in higher odds of a potential no-deal scenario ahead of the weekend, pushing GBP exchange rates into a sharp slump.

However, some of the pound’s downward momentum eased as February’s UK manufacturing and services PMIs both demonstrated solid growth on the month.

While it remains to be seen whether the UK economy can sustain any significant recovery in momentum in the face of ongoing trade talk uncertainty this still helped to limit the weakness of the pound.

Comments from outgoing Bank of England (BoE) Governor Mark Carney could put fresh pressure on GBP exchange rates this week.

Any indication that the BoE could cut interest rates in the near future would leave the pound vulnerable to another bout of selling pressure.

A slowdown in Friday’s Halifax house price index may also weigh heavily on GBP exchange rates as sentiment remains sensitive to any signs of economic weakness.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]

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