Very little transpired overnight and indeed over most of yesterday’s trading hours, with sterling’s fate hinging on the outcome of the ongoing negotiations surrounding the Irish backstop. If your gut instinct is to say, “What’s new?”, then you would be right; as no politician spoke out on the likelihood of success or failure, the pound closed more or less exactly where it opened on both the euro and the dollar.
This morning, however, sterling finally lost its nerve and broke first, racing down to 1.1160 on GBPEUR and 1.2262 on GBPUSD. The main reason for once was not that politicians had started talking it down, but rather by the market seeing a lack of progress and more of the same old rhetoric about “compromise in our negotiations” being peddled.
With a mere nine days until the EU summit, the market needs more than this kind of fluff if GBP is going to mount any substantial challenge to get above the 1.1200 GBPEUR mark in the short term. Furthermore, with a serious lack of notable data releases to back the pound up, unless we hear some concrete information on the progress of the backstop changes from the EU, sterling could well start slipping on a daily basis as any enthusiasm for a deal disappears.
Have a great day,