The UK is set to leave the bloc at the end of the week, and while Brexit uncertainty has remained in the backround recently, it has jumped back to the forefront of investors’ minds. Commenting on this, Jeremy Stretch, CIBC Capital Markets’ head of G10 currency strategy said: “It’s been a case that Brexit issues have been off the agenda for a while, but there are now some signs of friction between the two sides as negotiations are gearing up, and that might be a source of consternation.”
French and German ministers warned today that there is little time for the UK to agree to a new trade deal with the EU.
This comes as ministers arrived for the last senior EU meeting in Brussels which the UK is still represented as a member state.
Speaking to reporters, French minister, Amelie de Montchalin stated: “The more access to our internal market the UK wants, the more we have to converge on rules and norms. The degree of our economic openness will depend on the degree of convergence.
“If Boris Johnson wants a deal in 11 months with zero quotas and zero tariffs, we need guarantees of zero dumping and the level playing field. It’s impossible in 11 months to conceive a completely new commercial system [...] it’s not realistic.’
Meanwhile, Sterling has remained under pressure this week as investors continue to speculate on whether or not the Bank of England (BoE) will cut rates later this week.
Many analysts argue the result of Thursday’s BoE meeting are still too close to call, despite stronger than expected data at the end of last week.
Commenting on this, Deutsche Bank strategist, Jim Reid noted:
“This [BoE] meeting follows a run of fairly weak economic data over the last few weeks but with last week’s strong employment data and better than expected flash PMIs confusing the picture.
“Our economists have expected a cut for a good couple of months now, but markets are closer to 50:50.”
Looking ahead, the pairing could suffer further losses markets price in a larger chance of a BoE rate cut.
However, if Wednesday’s GfK German consumer confidence comes in weaker than expected, it could leave the pound euro exchange rate flat.