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Sterling edges lower as Britain serves ultimatum on EU

Written by Business World, on 15th May 2020. Posted in EU

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 Sterling fell on Friday, hitting its lowest for more than a month, after Britain and the European Union traded threats over a Brexit free trade deal.

British chief negotiator David Frost said on Friday the major obstacle to a deal was the EU's insistence on including a set of unbalanced proposals on a so-called "level playing field" that would bind Britain to EU rules.

On top of that, the EU's Brexit negotiator Michel Barnier said that the third round of talks was disappointing.

"Sterling sold off hard on the headlines across the board," Neil Jones, head of FX sales at Mizuho, said. "The FX market is clearly disappointed by the lack of progress on Brexit talks."

The pound had been under pressure earlier in the day after the British government reiterated its refusal to extend the Brexit transition period.

The currency is in its fifth consecutive day of losses and is the worst-performing G10 currency so far this month, having fallen more than 3% against the dollar in May.

The pound fell to $1.2155, its lowest since March 27, last trading 0.5% lower at $1.2173. It was also falling versus the euro, down by 0.8% to 89.10 pence.

"The increased pricing in of a no-deal Brexit should further weigh on the pound and encourage a further retreat toward the $1.20 level, and possibly below," Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, said.

The Brexit discussions added uncertainty as Britain struggles with COVID-19, the disease caused by the new coronavirus.

Britain's death toll has topped 40,000, the worst yet reported in Europe.

More than 440,000 self-employed workers applied for a government aid program that will give them a grant of up to 7,500 pounds ($9,142), during its first day of operation, finance minister Rishi Sunak said on Thursday.

London's Canary Wharf, one of the most powerful financial centers on earth, has drawn up plans to bring people back to the office after weeks of lockdown, the Financial Times reported on Friday.

The British economy shrank by a record 5.8% in March and the contraction in the April-June period could approach 25% and lead to the largest annual decline in more than three centuries, the bank of England said.

The central bank is not considering pushing interest rates below zero, although its Governor Andrew Bailey declined to rule it out altogether.

More quantitative easing in June is widely expected, which would hurt sterling further. (Reuters)

Source: www.businessworld.ie

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