Cabinet split over Brexit weakens GBP further

Continuing the trend for this week, the pound was on poor form on Wednesday thanks to market fears over the Brexit negotiations.

The pound is fluctuating this morning. While GBP/EUR is flat at €1.1343, GBP/USD has slipped marginally lower to US$1.3377. GBP/AUD has climbed 0.4% to A$1.7770, GBP/NZD is up 0.6% to NZ$1.9563, and GBP/CAD has risen 0.2% to C$1.7151.

The EU have now given the UK 48 hours to resolve the current issues blocking negotiations. Given what happened yesterday, that seems a stretch.

Read on to see just where the UK currently stands…

What’s been happening?

The issue of what will happen to the Irish border after Brexit continued to weigh on the pound yesterday.

Additionally, the Cabinet’s rift over the split from the EU widened further, with Theresa May denying claims from Chancellor Philip Hammond that the UK would pay the €50 billion divorce bill without any guarantees on trade.

Meanwhile, Brexiters are accusing the Prime Minister of trying to use the Irish border debate to force through a soft Brexit, with Jacob Rees-Mogg yesterday suggesting in Parliament that May’s red lines needed another ‘coat of paint’ as they were beginning to ‘look a bit pink’.

On top of this, markets were further disheartened when David Davis, the UK’s Brexit secretary, gave a confusing admission that there were no individual impact assessments into the result of Brexit upon different sectors of the UK economy.

Davies had claimed a few weeks ago that there were nearly 60 such documents that went into ‘excruciating detail’, so markets were left confused as to whether or not the UK government has actually prepared for the impact of Brexit.

After some early losses, GBP/EUR was able to end the day marginally higher thanks to disappointing Eurozone data and the strength of the US dollar.

Markets ignored positive comments from European Central Bank (ECB) official Yves Mersch, who claimed the Bank should fix an end date for the quantitative easing programme rather than leaving it open-ended.

GBP/USD ended the day having recovered most of its losses since the morning, although still lower overall.

The US dollar was boosted by a solid reading from the latest ADP employment report, which suggests that the labour market remains on a firm footing.

What's coming up?

The clock is ticking for the UK government to come up with a solution to the Irish border and citizens’ rights post-Brexit, which is sure to weigh on the pound today.

ECB President Mario Draghi will be chairing a conference today, so there may be some comments from him on monetary policy that caused jitters for the euro.

US jobless claims figures are set for release today, which could cause some movement for USD.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Reaz Rahman
Senior Dealer

Reaz, our Senior Currency Dealer, joined us in January 2015. Reaz draws on his detailed knowledge of the foreign exchange markets to help customers to choose the right service and time to transfer.