Tough times ahead for pound
Published on 18.12.2017 15:51

The British pound is trading higher today after as the EU and the UK move onto the 2nd round of talks surrounding Brexit which promises to be a hard-fought slog.

Now that the issue of immigration and border control is out the way, the focus is now on trade talks which is bound to be even more difficult as both sides are refusing to budge n several points.

The British government had wanted to restrict the movement of EU citizens from travelling freely through the UK while at the same time signing a free trade deal as was the case when the country remained in the European union.

From the EU’s point of view this is not an option and just goes to show how much needs to be done before a deal is reached and may put the pound under pressure until things are clarified.

“These are going to be the things that are very dominant for sterling whether or not there’s going to be more tension in May’s government, whether or not there’ll be tensions with the EU,”

said Jane Foley, head of foreign-exchange strategy at Rabobank International in London.

“The bones of negotiations will be of particular interest. “she added.

The British government also suffered a humiliating defeat in parliament last week as members of Prime Minister Theresa May’s own conservative party backed a motion to give parliament the final say on any Brexit Negotiations.

The fear is now that in the end this may lead to a hard Brexit with MP’s refusing to give ground to the EU on trade deals which if happens is also expected to hit the pound hard.

“Sterling is still carrying a premium reflecting risk of a hard Brexit. Over the next two months, the tone will be set.” Mrs Foley said.

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Andrew Masters

Analyst

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