LONDON, Aug 31 — The pound fell to a one-week low after Brexit negotiations between the UK and the European Union ended in acrimony.
Sterling’s losses contributed to the currency’s biggest monthly decline since October after Michel Barnier, the EU’s chief negotiator, said the third round of talks were “far from seeing sufficient progress.” The gridlock whittles the time the UK has to reach a trade deal and a transitional arrangement before it comes out of the EU in March 2019.
The pound has lost more than 13 per cent of its value against the dollar since the Brexit vote in June last year as investors fret how the US$2.6 trillion (RM11.1 trillion) economy will fare once the UK exits the EU. Uncertainty surrounding the Brexit negotiations are weighing on the wider economy as well, with UBS Group AG said to be leaning toward making Frankfurt its trading headquarters inside the EU.
“The risk of a no transitionary agreement seems to have increased today given the strong words from Barnier,” said Shilen Shah, a fixed-income strategist at Investec Wealth & Investment. “The key hazard for markets is that today’s disagreement is an indicator of where future negotiations are heading, with the danger that the risk premium on UK assets will widen if the talks implode with no agreement.”
The pound declined 0.5 per cent to trade at US$1.2863 as of 1.22pm in London, after touching 1.2853, the weakest since August 25. Sterling has tumbled 2.7 per cent this month against the dollar, the second-worst performance among the Group-of-10 currencies.
Prime Minister Theresa May said she will still run for re-election in an interview to ITV in Japan, though her own lawmakers doubted her prospects Comments earlier in the day from Bank of England policy maker Michael Saunders that a modest interest-rate increase was warranted did little to support the British currency GBP/USD support at 1.2852, 61.8 per cent Fibonacci of August 24 advance; resistance at 1.2938-40, August 30 high, 55-DMA EUR/GBP climbs 0.2 per cent to 0.9212 after reaching 0.9307 on August 29, its highest since October 7. Today’s move extends the euro’s advance this month to 2.8 per cent Scope for consolidation and re-alignment with short-term average lines before renewed jump higher Yield on 10-year gilts little changed at 1.04 per cent, after falling to 0.99 per cent on Tuesday, its lowest since June 21. — Bloomberg
Source: The Malay Mail Online