Yesterday saw the pound steady itself against the US dollar above the 1.3900 mark, finding its feet just under 1.3950. The delay in lockdown ending is keeping the pound pressured and rising tensions between the UK and EU are not providing much relief. EURUSD is gaining some lost growth, pushing back towards 1.1950, but still has some way to go to cover the 2.6% it’s lost over the last month.
The UK and EU are currently caught in a standoff over the Northern Ireland Protocol (keeping Northern Ireland in the EU single market for goods), with neither side looking to compromise. David Frost, the UK’s Brexit minister said that “time is now very pressing if we are to find solutions together”. The issue is that current systems cannot cope with the amount of checks required on goods entering Northern Ireland from Great Britain. The UK has unilaterally extended grace periods on some goods, but even so, the flow is putting authorities in NI under huge pressure. The EU has started legal action, stating the UK had failed to consult it about extending the grace period. Any Brexit tension is often tied to a drop-off in the pound, so the longer this continues, the more pressure the pound could come under.
This morning, Markit PMI’s will be released for the EU and UK giving us a better understanding of market sentiment, but all eyes will be on tomorrow’s BoE meeting at midday.
Have a great day.
Thomas Read, Senior Relationship Manager.
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