Sterling falls as UK and EU lock horns again over Brexit

A British ten-pound banknote is seen in a photo illustration taken March 16, 2016. —Reuters pic
A British ten-pound banknote is seen in a photo illustration taken March 16, 2016. —Reuters pic

LONDON, July 26 — The British pound weakened today, weighed down by European Commission President Jean-Claude Juncker’s telling Britain’s new prime minister, Boris Johnson, that a deal agreed by his predecessor was the best and the only Brexit agreement.

Juncker told Johnson yesterday that the European Union would analyse any ideas put forward by Britain, provided they were compatible with the withdrawal agreement.

Johnson has repeated his pledge this week to renegotiate the withdrawal agreement and promised to take Britain out of the EU on October 31 with or without a deal. He has also said the so-called Northern Irish backstop must be abolished to avoid a no-deal Brexit.

The backstop requires Britain to adopt some EU rules unless a future arrangement is found to keep open the land border between Northern Ireland and Ireland. The now-invisible frontier between the British province and EU member Ireland is Britain’s only land border with the bloc.

Ireland’s foreign minister said today that Johnson’s approach was “very unhelpful” and would block an agreement.

Concerns that Britain under Johnson is headed for a no-deal Brexit have sent sterling plummeting, although its moves this week have been minimal after investors rushed to price in a government under the eurosceptic face of the 2016 Brexit campaign in the run-up to his taking over.

“The Brexit impasse has already reared its ugly head, just days into Boris Johnson’s tenure as UK prime minister … The deadlock appears to solidify market concern over the prospects of a no-deal Brexit, keeping the pound rooted around the US$1.24 (RM5.11) mark against the ,” said Han Tan, analyst at FXTM.

Sterling fell 0.4 per cent to US$1.2406, a fair way below its weekly high of US$1.2522. The pound hit a 27-month low of US$1.2382 last week as fears of a no-deal Brexit jumped.

Banks say the pound could drop as low as US$1.00 in the event of a sudden, disorderly exit from the EU, Britain’s biggest trading partner.

Against the euro, the pound lost 0.2 per cent to 89.695 pence.

The Bank of England gives its monetary policy decision next Thursday.

Few economists expect the bank to change rates from the current 0.75 per cent. The focus will be on policymakers’ assessment of Britain’s economic slowdown and whether it justifies a rate cut down the line.

Money markets are pricing in a 25-basis-point cut by June 2020. — Reuters

Source: The Malay Mail Online

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