Traders desert pound as ‘no-deal’ Brexit fears rise
THE pound took a hit today as currency traders bet that a “no-deal” Brexit remains a distinct possibility after weekend talks without a breakthrough.
Sterling fell against the euro and the dollar, trading at lows of €1.1329 and $1.3082 days ahead of this week’s crunch EU leaders’ summit. Brexit Secretary Dominic Raab and EU chief negotiator Michel Barnier met in Brussels on Sunday afternoon but several key issues remain unresolved, including the vexed question of the Irish border. Prime Minister Theresa May is trying to keep together a fragile administration with Brexiteers opposed to an open-ended customs union backstop and Northern Ireland’s DUP unionists bitterly opposed to any different treatment of the province from the wider UK.
Mark Palmer at Hamilton Court FX said: “There was hope that a deal would be reached this week ahead of the Salzburg summit, starting on Wednesday. That would have set off a timeline for the legal text to be signed off by all of the EU and at least worked its way to the UK parliament. If we don’t get a deal this week, the risk is that this drags on to Christmas and from sitting down to Christmas dinner and falling out of the EU is only a 13-week timeline.”
Conor Campbell at SpreadEx said: “Following a troublesome Asian session, the European markets resumed their October losses. The pound fell 0.4% against both the dollar and the euro. The reason is hardly a surprise; after last week’s reports of an impending Brexit deal sent sterling higher, the weekend’s developments amounted to a bucket of cold water.”
The EY Item Club warns of low UK economic growth for the next three years. The forecaster is predicting GDP growth of 1.3% this year and 1.5% in 2019, down from 1.4% and 1.6% in its previous outlook three months ago.
These figures are based on there being a Brexit deal. Conditions could be “significantly weaker” otherwise, it said.