The US dollar has broken through the key resistance, it failed to cross since March so far. Riskier assets are dipping. Let’s discuss it in detail.
The pound is under the Brexit pressure again
The pound is again under the pressure this week. Despite the fact that the Bank of England has already changed its mood to more hawkish, based on the rising inflation and optimistic UK data, the pound is not increasing. The Brexit negotiations do not let the sterling firm its positions even a little bit. Even more, on Wednesday, February 28 the UK currency fell to three-week low. It happened because investors were threatened by the claim of EU chief negotiator Michel Barnier, who renewed concerns about the transition deal. Mr. Barnier said that there are “significant divergences” on the post-Brexit transition period. Also he added that the UK needs to increase the speed of negotiations if it wants any deal this year.
Today Theresa May gave a big speech on the Brexit deal. May declared that the UK is going to leave the custom union, however, they want to set an arrangement to keep trade seamless with no tariffs or quotas on the EU goods. The prime minister said that the government is aimed to bring the country back together, so they do not agree with the special North Ireland issue. So North Ireland cannot stay in the custom union. As we can see, she did not say anything new. Although May said that: “the U.K. won’t get everything it wants in the negotiations and she’s prepared to put business interests and jobs ahead of ideology”, her major deal points were opposite to the European ones. So it can mean the prolongation of the Brexit negotiations. Furthermore, May’s words did not support the sterling. GBP/USD almost stayed still.
Making a conclusion, we can say that there are huge doubts that the pound will be able to stabilize before the Brexit deal. As we could see, Mr. Barnier did not say anything crucial, however, it led to the plunge of the sterling. Another question is the time of the Brexit negotiations. More the UK and the EU argue on the deal, more the pound suffers. However, looking at the Theresa May’s speech we cannot be sure that parties will come to the agreement soon.
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