Sterling at Risk of Further Sell-Off
- PM May snubbed yet again by the EU – a familiar tale of rejection.
- Sterling remains weak and will test multi-month low.
Sterling (GBP) Looks to Make a Fresh 20-month Low
The latest in a long-line of rebuffs for UK PM Theresa May as her updated Brexit plan was swiftly rejected by the European Union, leaving the UK’s plans for leaving the EU in tatters. PM May asked the EU for their help on the Irish border backstop but her 12-month time limit was not acceptable to those round the negotiating table, leaving PM May seeking fresh answers. According to European Commission President Jean-Claude Juncker, ‘in terms of the future relationship our UK friends need to say what they want, instead of asking us to say what we want and so we would like within a few weeks our UK friends to set out their expectations for us because this debate is sometimes nebulous and imprecise and I would like clarifications.' Juncker also said that there was no room to renegotiate the current del and that the EU were upping their deal planning.
Against this backdrop Sterling continues to weaken and volatility is likely to increase over the coming days as we approach the Christmas break. The mid-week pick up in the British Pound has been reversed – a bout of short-covering - and against the US dollar, the recent low around 1.2475 is likely to tested again in the short-term. The US dollar also remains strong ahead of next week’s FOMC meeting where a 0.25% interest rate hike is fully expected. In addition, the Euro remains weak after ECB President Mario Draghi downgraded growth and inflation expectations yesterday.
GBPUSD Daily Price Chart (May - December 14, 2018)