January 28, 2023

Brexit deal doubts weigh on pound

LQDFX Forex news Blog Brexit deal doubts weigh on pound

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Sterling gave up some of last week’s strong gains on Monday on Brexit deal doubts. The European Union and Britain said “a lot more work would be needed” to secure an agreement by Oct. 31.

A Brexit deal was hanging in the balance on Monday after diplomats indicated that the bloc wanted more concessions from UK. A full agreement was unlikely this week.

The traders’ appetite for the pound’s short-term outlook has improved considerably over the past week. But market watchers warned that there were still hurdles in the way of Britain and the EU agreeing a deal. Sterling rocketed at the end of last week, posting its biggest two-day gain for several years. This came after Britain and the EU announced the surprise resumption of talks to agree a withdrawal arrangement before the scheduled Oct. 31 Brexit date.

Britain said on Sunday the latest talks had been constructive and there would be more talks on Monday. Johnson says he wants to strike an exit deal at an EU summit to allow an orderly departure on Oct. 31. But if an agreement is not possible, he will lead the United Kingdom out of the club it joined in 1973 without a deal. EU politicians such as Irish Foreign Minister said a deal was possible and that much more work was needed.

The pound fell more than 1% to a session low of $1.2517. Against the euro, the British currency weakened by a similar margin to 88.11 pence.

Forex – Brexit deal doubts weigh on pound

The mood was more cautious in an otherwise quiet start to the week for FX markets. Investors headed into safer assets. With Tokyo’s market is closed for a public holiday and a holiday in the United States for Columbus Day, trading volumes will likely remain lighter than usual.

The dollar index against a basket of six major currencies gained 0.20% to 98.501, up from a three-week low of 98.197 reached on Friday.

The yen rose 0.3% on Monday, away from Friday’s 2-1/2 month low, and was last at 108.15 per dollar. The Swiss franc rallied 0.2% against the euro to 1.0985 francs. The currencies, both viewed as safe havens, and the U.S. dollar had dropped sharply on Friday. Optimism over the trade talks, together with the European Union and Britain restarting Brexit negotiations, encouraged investors into riskier assets

On Monday the Australian dollar was lower, losing 0.3% to $0.6770.

The euro fell 0.2% to $1.1014 before recovering, while the dollar rose 0.1 % against a basket of currencies to 98.391.

Gold prices eased on Monday, extending falls for a third session. Optimism surrounding U.S.-China trade talks increased risk appetite, while a slight uptick in the dollar also weighed on prices. Spot gold dropped 0.1% to $1,487.81 per ounce, having shed 1% in the previous week.

Oil prices fell more than 2% on Monday. Scant details about the first phase of a trade deal between the United States and China undercut optimism. A U.S.-Sino thaw probability had helped lift crude markets by 2% at the end of last week. Brent crude dropped $1.46 to $59.05 a barrel by 1015 GMT. WTI crude lost $1.27 at $53.43 a barrel.

PLEASE NOTE The information above is not investment advice.

Sources: Reuters, Investing, CNN money