Sterling posts biggest loss in seven weeks on Brexit deadlock

The British pound falls 0.73 per cent, its biggest one-day drop against the greenback since January 18, 2019. — Reuters pic
The British pound falls 0.73 per cent, its biggest one-day drop against the greenback since 18, 2019. — Reuters pic

LONDON, March 8 — Sterling recorded its steepest loss against the in seven weeks yesterday after British and European Union sources said Brexit negotiations had hit an impasse.

Nothing suggests anything will change in Britain’s Brexit talks with the European Union over the next 48 hours, a government source said yesterday, adding that the EU was simply not moving.

EU Brexit negotiators rejected the latest proposals on the Irish backstop presented by Britain’s Attorney General Geoffrey Cox in Brussels on Tuesday and told him to rework them and come back on Friday, EU diplomats said.

The pound fell to US$1.3075, down 0.73 per cent, marking its biggest one-day drop against the greenback since January 18. It touched US$1.3067, the lowest level since February 25.

Against a weaker euro, it gained 0.37 per cent at 85.55 pence versus the euro after the European delayed a possible interest rate increase until 2020 and will restart a program to make cheap loans to banks.

“Hope for any early success for the British government is all but gone now,” said John Marley at FX risk management specialist, Smart Currency Business.

Further adding to the uncertainty was an amendment passed by Britain’s House of Lords on Wednesday calling for the government to negotiate a customs union with the European Union, giving May a potential new headache in her Brexit plans.

“Markets are getting conflicting signals from lawmakers in Britain and the negative news flow from Brussels on the negotiation process and that is keeping the pound in a tight range,” said Nikolay Markov, a senior economist at Pictet Asset Management.

In afternoon US trading, Bloomberg, citing people familiar with the EU side of the Brexit talks, reported the EU offered a proposal aimed to make the Irish backstop more acceptable among British lawmakers in a bid for them to approve a Brexit deal. But EU’s latest offer falls short of what Britain wants.

Most economists in a Reuters poll thought Brexit would be delayed by a few months and the two sides would eventually agree to a free-trade deal, according to the poll conducted between February 28 and March 5.

Expected gauges of market volatility in the pound ticked higher though it remained well below levels seen in November 2018. — Reuters

Source: The Malay Mail Online

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