The short-lived three-day rally of the pound against the euro was cut short through Asian trading and into this morning, after what appears to be a growing rift between the UK and Europe in the Brexit trade talks. Negotiations were cut short yesterday lunchtime, and today’s session cancelled, which sent a shock through analysts.
On what is already a very tight deadline to agree a free trade arrangement with Europe, some traders in the markets are now showing signs of concern that the two seem to be as far away as ever to reaching an agreement for the year-end. The EU’s chief negotiator, Michel Barnier, released a short statement after the developments where he said “after four days of discussions, serious divergences remain”. Traders are now looking to the timeline ahead as to a view as to where the rate will be heading from here. Talks are expected to resume on Monday, and continue through July as previously mentioned. Usually the EU parliament takes summer recess through August, which leaves very little in the way of remaining weeks to negotiate. October is said to be the cut off time for when a decision has to be made, so that the two sides can prepare for the UK to take on World Trade Organisation terms come 2021.
Elsewhere, the US dollar made good grounds yesterday and has pushed the cable rate lower, trading at around the 1.2450 mark at the time of writing. A stronger than expected jobs report yesterday and a rise in the Nasdaq, Dow-Jones and S&P, caused investors to move to the greenback. Despite the number of US COVID cases rising by nearly 55,000 through Thursday, investors still see the US dollar as a safe place to weather any storms.
Have a great weekend,
Author: Jack Nicholls, Relationship Manager
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