Sterling endured a rough day on Tuesday. Its troubles kicked-off early on in the European session when a telephone conversation between PM Johnson and Chancellor Merkel was leaked. The leak came from the UK side and implied that Merkel stated a deal could not be struck unless Northern Ireland agreed to some form of alignment with the European Union. Apparently PM Johnson confirmed this would not be possible and that it would effectively make reaching a deal near on impossible. These headlines spread across the news wires like a bad rash.
Within minutes the pound was on the back foot and heading towards the $1.22 and €1.11 handles against the US dollar and euro, respectively. Pressure remained on the currency throughout the day as speculation increased that the prospects of striking a deal by the end of this month were all but dead. Both the handles mentioned above held into the New York close but this doesn’t necessarily mean they’ll hold today. No doubt currency traders and dealers will be probing these levels to decide whether they’re strong or weak. It appears GBP bears have the upper hand for the moment.
Today’s calendar is another light one with almost nothing on the docket to focus on. It’s highly likely today’s price action is driven by headlines revolving around current US/China negotiations and not for getting any Brexit developments too.
Written by Viv Savani. 8:31am, October 9th 2019
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