Sterling has strengthened significantly against most major currencies. This followed the agreement on the Irish border issue, which was rumoured to be the last hurdle to complete the first phase of Brexit negotiations, following agreement on the divorce settlement sum, the role of the European Court of Justice and the reciprocal rights of citizens.
Jean-Claude Juncker has now confirmed that Brexit negotiations can move on to phase 2. This means negotiators from the UK and the EU can begin to discuss the kind of relationship the UK will have with the European Union following Brexit. This includes topics such as the freedom of movement of people and the all-important (as far as the Pound’s value is concerned) trade talks.
Donald tusk has indicated that these negotiations will not be straight forward and there are already rumours of other countries stipulating that the UK must not receive a better deal than they currently have with the EU. Rumours were previously circling that Brussels could be trying to make an example of the United Kingdom in order to ward off other regions following suit and leaving the EU. So it seems there are additional layers of complexity surrounding these trade discussions.
We have seen Sterling lose some ground since the agreement, following the initial jump this morning. The GBP/EUR exchange rate now sitting at 1.137, down from 1.15 at its peak, and the GBP/USD rate is currently 1.337, which hit 1.352 earlier in the day.
With exchange rate volatility expected to continue, if you are selling Sterling it may be wise to take advantage of current levels, the Brexit negotiations have plenty more potential stumbling blocks ahead. Don’t forget, it was only recently that Britain’s growth forecast was downgraded significantly and we are expected to be £42bn worse off in 2022 than previously predicted.