Brexit talks plunged into new crises; Pound dropped to a 12-day low against the US dollar and the euro
Sterling dropped to a 12-day low against the US dollar and euro. The Brexit talks were in a new crisis after Britain threatened to weaken the European Union’s divorce deal.
The pound fall one per cent at $1.3145, its lowest level since August 26.
As traders return from their summer holidays and post-Brexit trading deadlines, the UK currency is seen to be further weakening.
Meanwhile, reports suggest that Britain’s new plan could jeopardize the January agreement and create tensions in Northern Ireland. Britain plans to pass new legislation repealing key parts of the Brexit withdrawal agreement.
In January, Britain had officially withdrew from the European Union. However, it is trading on the same terms as before the exit in a transition period until the end of this year.
London and Brussels have announced that the deadline for signing agreements on post-Brexit trade is October. As time goes on, any suspicious news related to Brexit will force traders to sell the pound.
Another factor is that it already suffers from a deep corona virus recession and a debt-to – GDP ratio of 100%.
Experts say Britain will face massive unemployment if the government’s furlough scheme expires by the end of this month.
“We’ve had weeks of pretty negative stories about the UK doubling its fishing quota, which would not be agreed to by the EU. We’ve got the state aid regimes still not being laid out as well by the UK side. So I think sterling is going to underperform here,” said Jordan Rochester, currency analyst at Nomura.
Rochester says the British pound will continue to fall against the euro ahead of the European Union summit in mid-October.
“And if we do get an actual announcement of no deal, prepare for a hard Brexit, the pound should continue to weaken, we’re talking something like 95 to 98 pence against the euro,” he said.
The decision by British finance minister Rishi Sunak to abolish house sales stamp duty up to a certain level before March of next year has helped start a mini spike on the housing market.
Mortgage lender Halifax said today that prices jumped by the most since 2016 in August to hit a record high.