Monday was a roller coaster for the pound which encounter a significant fall in the morning, followed by somewhat of a rally in the early evening. This could be a good indicator of what may come later this week as the Brexit end game continues to play out just weeks before the transition period between the UK and EU ends.
Following a report from the Sun newspaper that PM Johnson was ready to walk away from negotiations if no progress was made imminently, the pound began a major move lower. From peak to trough, the GBPUSD pair fell just over 2 cents, with GBPEUR not too far behind. This negative sentiment continued throughout the European morning and afternoon session.
Later in the afternoon, a little positivity began to shine through. The UK held out an olive branch via the offer of removing parts of the Internal Market Bill which essentially contradicted the Withdrawal Agreement. This was followed by a call between PM Johnson and EU President, Ursula von der Leyen who agreed to meet in person (most likely Wednesday) to attempt a compromise on the 3 remaining issues. This would occur independently from the EU summit which begins on Thursday. The scene is set for much more volatility for the British currency. If you have shorter-term requirements that need covering, and would like to avoid any further volatility, please contact your Cornhill FX dealer who can assist.
8:20am, December 8th 2020
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