Next 24-hours crucial for the Pound
The Pound has jumped up 1% in the last hour, due to reports suggesting that fishing is the last sticking point in Brexit talks. The FT have reported that there is now a landing zone between the EU & UK on state aid, which has erased the losses Sterling was hit with this morning (-1%). We are expecting to hear from both parties' chief negotiators this afternoon on what happens next with talks.
PMI data earlier today had little effect on the market as both the EU & UK's figures came in and around expectations. Instead, it was the EU Commission President Ursula von der Leyen who impacted the Pound this morning. The EU have sent a letter of formal notice to the UK stating it intends to take legal action for breaching its obligations under the withdrawal agreement. The one-month deadline coincides with the EU's Brexit deadline, putting yet more pressure on the UK Government and subsequently the Pound.
The stakes are getting higher and so is market volatility. Surely for Brexit talks to progress further, the internal market bill will have to be withdrawn. The bill still has to pass at the House of Lords which won't be for a couple of weeks yet and there is no guarantee it will pass, as the Conservatives do not command a majority there.
The Pound had been steadily declining across the board all morning before the FT report (£-€1.1020-1.0930 & £-$1.2940-1.2820 mid-market). On a £100,000 exchange, that is a loss of €900/$1200 within a couple of hours. Then in a blink of an eye, all losses were reversed. This is the kind of volatility we can expect day-to-day for the remainder of the month as Brexit headlines fly around. As always, setting rate alerts to catch the jumps and to protect you from sudden falls are key.